It’s Always Risk-on for Selling

In the financial trading community, there is a concept called “risk-on, risk-off,” or RoRo for short. It refers to the general market sentiment at a point in time. Simply put, if the prevailing trend is toward more risky and aggressive instruments (e.g., stocks, emerging markets), that is called “risk-on.” If the trend is toward less risky and conservative assets (e.g., cash, developed markets), that is called “risk-off.” Traders have evolved all kinds of complex strategies to deal with this indicator.

What does that have to do with selling professional services? It’s tempting to view selling as a series of RoRo moments, where sometimes it’s appropriate to take a risk and sometimes it’s not. Maybe the client has become complacent, and you need to shake things up. Or maybe the client seems overwhelmed, and you need to back off. It feels only natural to construct our responses to situations based on our readings of “risk-on, risk-off” coming from the client.

That might seem natural, but most often it’s more wrong than right. In selling, particularly in the complicated worlds of complex or professional services, we systematically make one mistake. We err mostly in one direction. We keep doing the same thing, expecting different results. We have a built-in bias to view the world as risk-off, and we need to shift our attitude toward risk-on.

People and Risk

Adult humans have a well-developed sense of fear and suspicion. Maybe it comes from our ancestors’ close encounters with saber-toothed tigers (that food looks enticing, but I’ll pass it up if I have to walk too close to the tigers). If we view the world as full of such threats to our existence, then we behave in a risk-off mode, being very careful.

If we view the world as risk-off, we will guard against a Bad Thing Happening. And if that means we leave a Good Thing Undone, we are fine with that decision. Who wants a close encounter with a sabere-toothed tiger, anyway?

But suppose the world is risk-on, and we constantly behave cautiously. Suppose we always leave Good Things Undone, not taking a small risk, never daring to take the next step forward. Suppose we are so afraid of doing “sins of commission” that we constantly commit “sins of omission.” That can end up very badly, too.

The world of sports has plenty of adages about this situation. No pain, no gain. Just do it. Swing the bat. Nothing ventured, nothing gained. As Wayne Gretzky put it, “You’ll never miss a shot you never take.”

Finally, add the dimension of time. If the Good Things are far in the future and the Bad Thing is here-now, we are likely to focus much more on the here-now Bad Thing even if the future benefit is much greater and well worth the risk. In fact, even if the Bad Thing is far in the future and the Good Thing is here-now, people tend to be very cautious about the future negative, even if it is smaller than the positive.

Again, we have sayings: A bird in the hand is worth two in the bush. Really? Unless you’re starving, turning down a two-to-one deal isn’t very smart. A poker player who constantly folds will never lose big, but he’ll slowly bleed dry. The suitor who never asks out the enamorata is never rejected, but nonetheless always dines alone.

Risky Business

Business is full of risks, to be sure. Hiring the wrong employee, investing in the wrong market, those things are real and we are right to worry about them. But in selling, the risk of not doing the right thing is a lot higher than the risk of doing the wrong thing. We act as if we are in a risk-off world, but in selling, more often than not it’s a risk-on world.

The saber-toothed tigers we face in selling seem to come in droves: The client might be offended. I don’t want to look unprofessional. If my price is too high they might not buy. That might be inappropriate. I don’t really know that area of finance. It’s too early in the relationship. They might not like me. They might go with my competitor. My peers won’t respect me. I might be wrong. I might say the wrong thing.

So we do nothing. We take the easy way out, the path of least resistance, all the while telling ourselves that we have avoided an imminent saber-toothed tiger. And sure enough, no tiger appears. By folding our hand, we avoid catastrophic loss. But we never win, or never win much. We act like the world of sales is risk-off when in reality it is far more risk-on.

Fighting Human Nature

The world of product sales approaches the problem as mainly one of motivation. Sales books and conferences are full of admonitions to get out there and try some more, it’s a numbers game, don’t take rejection personally, read this book, listen to that motivational speaker.

You probably don’t see yourself that way. You think motivational speakers are cheesy, and losing a widget sale pales in comparison to the agony of being told that your particular service just isn’t all that good. You need something deeper, something that really changes your approach to risk-taking. And reviewing the odds isn’t going to cut it. It’s human nature we’re dealing with here, and the brain is over-matched when it’s up against the heart.

Instead, recognize the powerful-positive role that risk-taking actually plays in sales. Unlike with saber-toothed tigers, the act of taking a small risk now actually lowers the odds of a big risk later. Yes—small risk-taking mitigates big risk. If you take risks, you lower the bigger risk.

Think of a vaccine. For the small pain of a shot in the arm, we gain protection against a plague. For the small risk of a hand extended, we gain greater likelihood of a conversation to follow. For the small risk of making a phone call instead of an email, we lower the risk of later emails being left unread.

The key to taking more risks lies in taking a broader view: the risk is not the risk of one transaction now; it is part of a series of transactions to happen over time. In that broader view, taking the small risk now is the least risky thing you can do.

This is where we part ways from our product-selling brothers and sisters. They have to sell widgets, pretty much one widget at a time. It is much easier for us, selling complex services, to envision relationships and lengthy time horizons. And that is the key to mastering the risk problem.

The world of sales is far more risk-on than we think; the environment is much more welcoming of small risks than we think. The key to beating risk lies precisely in taking the small risk of making that phone call, commenting on that shared intimacy, being transparent about your experience, and being open about your price.

It’s a risk-on world out there for those of us willing to see the bigger picture.

 

The Consulting Industry: the Critical Role of Interpersonal Relationships

This is the first in an occasional series on trust in particular industry verticals. This post looks at the consulting industry.

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In consulting, some things are changing. And some are not.

The biggest trend is, of course, the digitization of the firm’s service offerings. For example, nearly three quarters of one large consulting firm’s HR practice consists of moving processes into the digital age. Naturally, firms increasingly put more emphasis on technical qualifications of their consultants.

Another change, nearly as big, is the shift in business development practices (this one isn’t unique to consulting). Depending on who you talk to (Marketing BlenderGartner), something like 50-60% of the buying process is complete before the buyer meets a seller. This number is only going higher. Naturally, firms focus increasingly on managing that non-personal-contact front end of the business development process.

However, the critical role of interpersonal relationships is not going away. Paradoxically, the increasing role of technology and automation does not mean that the role of relationships is decreasing – in fact, it means exactly the opposite. Here’s why.

On the project side, expertise is a commodity. The markets for human capital are efficient, and widely accessible. On the business development side, virtually no client wants to buy a significant project without understanding, and meeting, the people who will staff it.

This is an important fact of human biology. Reducing the time spent on human interaction merely increases the leverage that such time has on final decisions. Those infrequent interactions take on geometrically more importance as their duration declines.

The implication for consultancies?  The ability to rapidly and genuinely create trust with clients is more critical than ever. You don’t have the luxury of schmooze time to establish comfortable relationships; it’s got to be done deeply and quickly, and done right.

Trusted Advisor and Trust-Based Selling workshops, are aimed at this need. 60% of our work is done in various professional services clients, with consulting a heavy component.

For a discussion about these issues, drop me (Charles Green, CEO, Trusted Advisor Associates) an email at cgreen-at-trustedadvisor-dot-com. You’ll not go onto an email list; there are no automated follow-ups; no cost, no obligation. Just let’s talk.

Perfect Pitch in Sales: 9 Rules

You may know it as the dog and pony show, the beauty contest, the shoot-out. Or you may just call it “the pitch.” The term is especially common in some industries—advertising, executive recruiting, some law firms—but we all know it.

We typically think of it as an event – a rather formal presentation by several professionals made to several members of the client organization that typically lasts 30 to 90 minutes. Secondary characteristics of a pitch often include PowerPoint and a time-slot among a few other competitors who are pitching on the same day.

Let’s be clear: there is no single perfect pitch, since the winning pitch is situational to you and your client. Still, there are some guidelines that hold true. Here are nine rules for perfecting your pitch.

1. When the Best Pitch Isn’t a Pitch

Sometimes the best pitch is one that never happens – because both parties choose an alternative.

Think of a pitch as a blind date where each party is cautious. The quietly cautious buyer wants control and seeks it in an impersonal, formal event. The seller also wants control but expresses it by being assertive. One fears being “sold;” the other fears losing. When both parties are fearful, decisions get made on process, features, and price.

Both parties are often better off starting from a strong relationship. Though both know this, they engage in denial, not wanting to admit it. Sellers may try to go around pitch events. The trick – not really a trick at all – is to explore the possibility of meetings before the pitch during which personal relationships can be established. It’s critical that this be done from a position of respect and honest concern for what’s right for the client.

Sometimes the client then abandons the pitch idea altogether because they find one competitor that seems to understand them uniquely. That’s generally a good outcome for both parties. But do NOT try to force this outcome—you’ll jinx if it you do.

2. The Pre-Pitch Warm-Up

Your objective shouldn’t be to avoid the pitch, but to produce a good outcome for both parties. Any pitch will be improved by prior conversations with as many client people as possible.

If you are meeting the client representatives for the first time at the pitch, your odds are even less than one divided by the number of competitors. It’s less because with total strangers meeting each other, the “none of the above” option frequently appears on the table.

Of course, not every client wants to meet you in advance. Often the intent of the pitch is to prevent such meetings in the first place in pursuit of an “independent, fair” competition. Pushing too hard for meetings can appear distasteful.

How do you know how far to push the suggestion for prior meetings? Simple – ask the client. Point out the advantages of offering all competitors a chance to talk with them in advance, then gracefully yield if the resistance is too strong. You get a few points for offering if you do it respectfully – just don’t push your luck.

If you can talk to people in advance of a pitch, you’ll improve the quality of the pitch for both you and client. Of course, you learn valuable information, and you get to call people by name. But it goes much further than that because the next key to a great pitch is interaction.

3. Interact in the Pitch

Nearly always the client says, “Tell us about yourself.” And nearly all sellers assume that’s what the client wants – after all, they said so!

But the truth is, listening to someone – anyone – talk about themselves for 30 minutes is incredibly boring. Even more important, listening to others does not persuade human beings—they become persuaded by listening to others who have previously listened to them.

Letting clients be heard is critical to successful pitches. If you can’t do it before the pitch, then dare to be great and engineer listening into the pitch. Here are several approaches:

  • Tell the client ahead of time you’d like to ask for reactions
  • Build in “and what about you?” questions into your pitch
  • Offer data about similar situations and ask for comment
  • Ask the client if they’d consider a “first-meeting” approach. Instead of a standard pitch, offer to treat the pitch like a first meeting, as if you’d already been hired, and allow five minutes at the end to talk about how it felt. (This is not a crazy idea; I know of two success stories using it.)
  • If you’ve had any prior-to-pitch conversations, refer to them.

Remember: what you say in the pitch matters less than whether you have listened to them first.

4. Have a Point of View

Your qualifications, credentials, and references are worth absolutely nothing if you can’t show relevance to the client. To walk in without a point of view on the client and the issues facing them is arrogant, disrespectful, and selfish. Those are strong words; let me back them up.

If you want this job, you’ve (hopefully) thought about what you’d do if you got it. If so, why wouldn’t you share it? The probable answer is because you’re afraid you might have gotten it wrong.

But that fear is all about you. Now is precisely the time when not to take a risk is risky. The client wants to see if you’ll do some homework on spec and if you’re willing to engage in real-time thinking about it. They want some sample selling. Showing up with nothing but a track record is like going on a blind date with just a list of past dates. It’s no better as a pitch strategy than as a dating strategy.

5. Collaborate on Talking Price

Conventional wisdom says don’t quote price until the client has heard benefits so that they can properly calculate value. This makes theoretical sense, but it ignores human psychology; price is the elephant in the room during the pitch.

While everyone listens (or pretends to listen) to your pitch, they are all mildly pre-occupied with what your price is going to be. That pre-occupation is death to their ability to listen to you, so air it.

When you walk in, place a five-page pile of paper on the table, saying, “This is the price part of our proposal—the bottom line and four pages of backup explaining it. We don’t want to focus on it, nor do we want to keep it from you. At any point in the conversation today, you can ask us to turn the page over, and we’ll talk about it. Wheneveryou want.”

The point is not when you talk price; it’s about who makes that decision.

6. PowerPoint Pointers

There seems to be an emerging consensus among presentation professionals that looks like this:

  • Most presentations are written as leave-behinds: build your pitch on the presentation, not the leave-behind
  • Less is more: limit yourself to several bullets
  • Don’t read aloud what’s written: get a picture and talk from that
  • Visuals are great, great, great: use photos, not clipart
  • Except for the title page, lose the logos and backgrounds

7. Handling Qualifications

Most big sales these days follow a two-step process: screening and selection. Most screening is done on credentials. That means if you’re in the pitch, your credentials got you there. The pitch is the sale you already got; stop selling it.

If the client specifically requested a section on credentials, don’t embarrass them by fighting it. But you can touch briefly on credentials, with a large leave-behind set of documents. Go through them only if the client insists.

8. Dissing the Competition

This is an easy one. Don’t. Don’t do it, don’t go there, don’t even think about it. If asked, demur, with, “We respect our competitors. You should talk with them. But they can speak well enough for themselves without our help.” Taking the high road never hurts, and it usually helps.

9. When to Ditch the Pitch

Imagine a pitch where an obstreperous client takes you off script away from the PowerPoint or raises a point well in advance of when you had intended to address it.

Disaster? Not at all. In fact, it’s quite the opposite. This is client engagement – exactly what you want – cleverly disguised as an objection. Greet it with open arms. Ask the client for permission to go off script and deal directly with the issue raised for as long as the client wants.

Remember: despite what the client said, it’s not your PowerPoint they want to see – they want to feel how it will be for you to interact with them. If you respect their wishes, move your agenda to fit theirs, and respond directly with relevant content, you will address precisely that desire. And you will more likely win the pitch than someone who stayed on (Power)Point.

Operating Transparently

Transparency is one of the Four Trust Principles for creating trust-based organizations. The other three are other-focus, collaboration, and a medium-to-long term perspective (aka relationships over transactions). Here’s the business case for transparency.

The article Is Transparency Always the Best Policy? first appeared a few years ago in Harvardbusiness.org. The article is about Paul Levy, President and CEO of Beth Israel Deaconess Medical Center, and the answer to the blog’s question, based on this sample of one, would appear to be a resounding ‘yes.’

In matters great and small, Levy has simply made it an operating practice to behave transparently. His great results may surprise many, but they make a great deal of common sense.

If you are transparent about your activities, you are saying you have nothing to hide. If you have nothing to hide, then people trust what you do.

If you are transparent about what you say, then you don’t risk saying one thing to one person and another to another. You don’t appear to be two-faced; you appear to have integrity—you say the same thing to all persons. (And, it’s a lot easier to remember what you said if there’s only one version).

If you are transparent about what you think, then people can observe your thinking, and see that you are not editing what you say. They feel you are available to them, that you are not segmenting them off.

If you are not transparent in your actions, your words, and your thoughts, then people wonder about your motives. Why are you doing what you’re doing?

What is it you really mean when you say something? And what are you really thinking when you’re thinking?

Suspicion about motives colors every aspect of trust—it affects your credibility, your perceived reliability, and the degree to which people confide in you. The antidote to a bad case of suspicion is transparency. It’s as true in the financial and regulatory world, in the world of negotiation, and in the world of accounting, as it is interpersonally.

So Why Aren’t We All Transparent?

With all the obvious advantages that transparency conveys—why aren’t we all more transparent more often?

There are a thousand answers, varying in particular, but with some common threads in general. At the root of it, I think, is fear.

Fear that others will take advantage of us. Fear that we will be misunderstood, or shamed. Fear that others will see the true inner “me” and thus steal the faux power we foolishly think we maintain by being opaque.

Transparency is both a result of lowered fear, and a cause of lowering fear. Sharing information with another encourages another to share with us. Disclosing information within a company—as Paul Levy did so frequently—begets teamwork and lowers suspicion.

The willingness to be transparent in negotiation helps the other party figure out what it is that you want—so the paradoxical result of taking a risk is that you increase the odds of getting what you want.

Transparency is an invitation to collaboration and connection. It lowers fear, it increases trust.

It feels like taking a risk, but it’s really risk-mitigation in disguise.

Operating transparently isn’t just a hospital procedure.

The Traveling Salesman? Or the Prisoner’s Dilemma?

The Prisoner’s Dilemma is a classic conundrum in game theory. It purports to explain why two people might not cooperate, even if it is in both their best interests to do so.

It turns out that the solution to The Prisoner’s Dilemma is also the solution to a great many sales problems—those in which your customer doesn’t trust you. Are you living in the Dilemma? Or are you living in the solution?

The Dilemma of the Prisoner

Here is a classic version of The Prisoner’s Dilemma:

Two suspects are arrested by the police. The police have insufficient evidence for a conviction and, having separated the prisoners, visit each of them to offer the same deal:

  • If one testifies for the prosecution against the other (defects) and the other remains silent (cooperates), the defector goes free and the silent accomplice receives the full 10-year sentence.
  • If both remain silent, both prisoners are sentenced to only six months in jail for a minor charge.
  • If each betrays the other, each receives a five-year sentence.

Each prisoner must choose to betray the other or to remain silent. Each one is assured that the other would not know about the betrayal before the end of the investigation. How should the prisoners act?

What’s a poor prisoner to do?

If you analyze the situation rationally (the way a game theorist or economist defines that term), your odds are a lot worse if you remain silent – either you get 10 years or six months. But if you rat on your partner, you either get out free or, at worst, five years.

So, reasons the economist, Option A’s average “value” is five years and three months in prison. Option B’s average is two and a half years. “Ah ha,” says the economist’s rational player, “I’ll go for Option B.”

Of course, the other player does the same math and comes to the same conclusion. As a result, each gets five years in prison—a total of 10 prison-years between them.

The dilemma is that – if only the prisoners had cooperated with each other, they could have each gotten out with just six months in prison – a total of one prison-year between them.

The question is: why don’t they cooperate?

At least, that’s the economists’ question. In the real world, cooperation is quite common.

So the real question is: why do so many people listen to economists?

The Dilemma of the Salesperson

Before answering the Prisoner’s Dilemma, let’s note the similarity with The Salesperson’s Dilemma.

The salesperson has a similar series of trade-offs. For example:

  • “I could take some extra time to study up on tomorrow’s sales call, getting to know more about the prospect. That would improve the odds of my getting a sale tomorrow.”
  • “On the other hand, I could make another cold call with the time saved if I don’t spend it studying up for tomorrow’s call.”

Or, another example:

  • “I could tell them we have very little experience in this area, which would increase their sense of my honesty, which would help me in the long run.”
  • “On the other hand, experience might be the key in getting this job, so perhaps I should make the best case I can and fudge the rest.”

Still another:

  • “I could share a lot of my knowledge with them, which would really impress them and make them grateful to me.”
  • “On the other hand, if I give it all away in the sales call, they might just steal my knowledge and not pay me for it – perhaps I should wait until after we have a signed contract.”

And one more:

  • “I could go out on a limb and make some really far-sighted observations that would help them—it would go way beyond what they asked for.”
  • “On the other hand, we don’t have much trust built up yet. They might see that as presumptuous or unprofessional; I’ll just answer the questions they asked.”

Just as with The Prisoner’s Dilemma, if the salespersons continually choose Option B, they will sub-optimize. They will do cold calls, leading with no relationship, taking no risks, treating the customer like a competitive enemy, and offering no great help.

In other words, they’ll lose. Just like the prisoners.

In theory, the prisoners are identical, whereas the salesperson and the customer are distinct. But that’s theory. In the real world, sellers somehow tend to find buyers who are similar to them. Sellers who are fear-driven and guarded somehow often find buyers who justify their worst fears. (Or, what amounts to the same, sellers project fear, and buyers reciprocally return the same – as humans are wont to do).

Both seller and buyer often operate from the Prisoner’s script. And the result is just as sub-optimal.

The Prisoner’s Solution

As postulated by economists and game theorists, The Prisoner’s Dilemma is usually presented with two key assumptions:

  1. The game is played only once
  2. The players do not know each other

The solution lies in changing each of those assumptions. If you tell the players the game will be played 10 times, cooperative patterns begin to emerge. If it’s played 100 times, cooperative strategies take over.

If the players are given information about each other, they become less abstract to each other. If the information is personal, then the relationship changes tone as well.

These two dimensions – time and relationship – are critical. Without a sense of continuity over time, and without a sense of personal relationship, those playing the game will opt to “rat out” each other – even knowing that the result, system-wide, is negative for them on average. But given time and relationships—the optimal solution emerges. Everyone is better off.

In other words, the solution to behaving stupidly is to develop personal relationships over time. Now let’s see how that insight applies to selling.

The Sales Solution

The sales solution should look pretty obvious now. Suboptimal behavior is the result of short timeframes and shallow relationships. In a Prisoner’s Dilemma world, both buyer and seller fear each other, suspect the worst, don’t have relationships beyond the transaction, and are interested primarily in their own self-aggrandizement, without regard to cost to the other party.

If that sounds familiar, just look at what sales topics are hot these days: sales automation, lead screening, CRM, social media lead generation, predictive analytics, search-based prospecting, multi-channel messaging. Think about the last step in nearly every sales process model you’ve seen—closing.

What all these subjects have in common is a view of selling that is a) transactional and b) impersonal. In other words, they have short timeframes and weak relationships—two things sure to hurt sales.

Selling benefits from longer timeframes and better personal relationships. If you can stop thinking like an economist and work to eliminate the fear you and your buyers have, you’ll benefit from the long-lasting trustworthy relationships that develop as a result.

Trusting your colleagues will make you more trustworthy to your customers

If you’re trying to sell your services, you already know the value of being trusted. Being trusted increases value, cuts time, lowers costs, and increases profitability—both for us and for our clients.

As a solo practitioner, being trustworthy is pretty straightforward (note that I didn’t say it’s easy). But when you are part of a company and have to rely on other colleagues, it can feel much more complex.

What effect does trusting your colleagues have on being trustworthy with your client?

Let’s start with the obvious: we are all human, with very human needs. In the world of professional services, these needs probably show up as some flavor of wanting to help the client succeed, wanting to provide the right solution, wanting to be good at what we do, or wanting to be respected and liked.

In organizations where there is low trust, when you have to rely on your colleagues, these human needs can become vulnerabilities – actually getting in the way of doing what’s right for the client:

  • You become territorial about your client, or concerned about your credibility, so you limit and control access to your client
  • You’re not an expert in someone else’s knowledge area, so you don’t bring it to the client as a possible solution
  • You want to be the one to solve the client’s problems, so you take on more than you can handle, or tasks for which others are better suited

And so – despite the best of intentions and because of being only human – you become a bottleneck.  You limit your client’s access to all the company has to offer, and you create (at best) unnecessary complexity and delays in providing solutions, or (at worst) a single source of failure when things aren’t going well.

It takes a village

Building trust within your organization is a powerful way to overcome these vulnerabilities. The easiest way to explore this is through the Trust Equation:

 

When you trust your colleagues, you can be more trustworthy for your client. We can see this in all four variables of the trust equation.

When you trust your colleagues:

You don’t have to be the expert on everything, so you can bring more and better solutions, and be candid when he doesn’t personally know something, which increases your credibility

You can delegate work to better meet commitments on time, and get the information you need to alert the client if a commitment can’t be met, which increases your reliability

You know your colleagues and leadership stand behind you, so you can take more personal risk with your client, which increases your intimacy

You don’t worry about your colleagues’ motives, so you are willing to introduce more people to the client, and you can focus on the client’s needs without distraction, which demonstrates low self-orientation

Building Trust Internally

Trust in the workplace starts with the organization (Charles Green wrote a great blog about organizational trust), but trust among employees still is a personal choice – and while you cannot force someone to trust you, you can be more trustworthy.

In our workshops, we ask participants how they can be better trusted advisors to their colleagues. Here are five ways they identified to increase trustworthiness among employees:

  1. Be trusting. Extending trust is a powerful Intimacy move – taking the risk to trust someone creates space and momentum for them to trust you in return. The ultimate trust paradox.
  2. Respond fast. We’re all responsive to our clients, but how responsive are we to our colleagues? If you are busy with client work or need to prioritize requests for a short time, consider an automated email response that lets people know you are unavailable and when you will
  3. Listen more, and better. Good listening is a low self-orientation skill that creates high intimacy. Try holding your questions until the end of a presentation, acknowledging what someone said before asking them a question, or asking a coworker about their weekend (and then really listening to their response)
  4. Share information freely. It’s no accident that transparency is one of the four Trust Principles. Sharing information freely increases every variable of the trust equation, especially if it’s bad news (here’s a tip for sharing bad news).
  5. Seek to know others. For biggest impact, this is both knowing more people and knowing people at a deeper level. To expand your network, introduce two coworkers who don’t know each other, eat lunch in the cafeteria, or join a virtual community. To deepen relationships, address people by name, start a meeting with personal introductions, or invite a coworker for coffee.

So if you’re working hard to build trust with your clients, take a look at how you’re doing with your colleagues.

 

Don’t Manage My Expectations

“An expectation is a pre-meditated resentment.”  So goes one interesting saying aimed at managing our own expectations.

But what about managing others’ expectations of us?

  • Have you ever done a small extra favor for a client, just to show your good will, and then ended up getting called out for not doing it repeatedly – even though it was outside the scope of your original contract?
  • Have you ever over-promised in an attempt to close a deal or a budget?
  • Have you ever under-promised in order to make sure you could over-deliver on a contract, or a sales target?

Setting expectations is a major issues in our professional relationships. All these situations are fraught with peril – let’s just focus on the third as a case example.

Always Exceeding Expectations

You know this one – the mantra to ‘always under-promise and over-deliver,’ perhaps as a way to achieve customer delight. Problem is – if you consistently under-promise and over-deliver, you are,  in an important sense, lying. You are deliberately telling your customer (or whomever) one thing, and then doing another. How else to describe that form of managing expectations?

Over time, this destroys your credibility. Whether it’s stock analysts looking at your quarterly guidance, or employees expecting you to top last year’s ‘surprise’ holiday bonus, once you say one thing and do another, the only expectation you’ve ‘managed’ is the expectation that your future behavior will resemble what it was – an intentional sandbagging – not what you said it would be.

And so the party you’re trying to influence makes their own mental adjustment to counter-balance your expected over-delivery– negating your attempt at ‘management.’ Except that another degree of uncertainty is added on each end.

Managing Attitudes

There’s no question that a good attitude helps with life. Measured optimism, a propensity to trust, a positive outlook – all these increase the odds of positive interactions with others. Whether you expect ill or good of another person, that’s probably what you’ll get.

But what if an entire generation is raised the Lake Wobegon way, believing they’re all above average? What if self-help affirmations are of dubious benefit because on some level we don’t believe what we’re trying to tell ourselves? What if corporate and political spin get so bad that they destroy our trust in the very institutions and people who are seeking to manage our expectations?

Attempts at managing attitude are ultimately seen as patronizing. Whether it’s “don’t get your hopes up,” or “you should feel really good about this,” we resent others doing our feeling for us. We want the right to determine our own reactions, therefore our own attitudes.

Managing Expectations the Right Way

It is true that bad surprises are not a good thing. It’s also true that expectations aligned with reality (or slightly more optimistic) are preferable to living in a fantasy world. The problem is not with the noun ‘expectations.’ It comes with the verb – it matters who does the ‘managing.’

I want to manage my own expectations. You can help me by telling me the truth. That means six things:

  1. Be transparent. Get way past just not lying to me. Tell me all the truth you have access to. Make it a policy to give me access to data-without-interpretation.
  2. Prove to me – over and over – that I can depend on you. Promise me lots of little deadlines and meet every one of them – precisely, on the money, not ‘over-performing.’ Do exactly what you said you would do.
  3. Trust me. Share things about yourself with me that I could misuse against you, take risks on me that allow me to over-perform. Because then I have a chance to prove to you how competent and trustworthy I am.
  4. Respect me. Give me the data and let me make up my own mind how I feel about it. Don’t spin me, don’t tell me how I should feel.
  5. Be straight with me. If you do see my expectations careening out of control, and you think I’m about to make a serious error, then pull me aside and tell me straight; don’t sugar-coat it.
  6. Hold me accountable. Call me on my bullshit; confront me when I fail to deliver on time; be forthright with me when I let you down. And let me know that you expect me to do the same.

The best way for you to manage my expectations is to leave their management to me – that’s hard enough.

Are You Selling to Vulcans?

Nowhere am I so desperately needed as among a shipload of illogical humans.

Mr. Spock in ‘I, Mudd’

The iconic Mr. Spock from Star Trek was half-Vulcan, half-human. It’s the former we first notice in Spock – Vulcans are governed entirely by logic and rationality, unencumbered by emotions.

But it’s his human heritage that takes Spock from caricature to character. Spock mirrors our own schizophrenic, rational / emotional natures. He is the sock puppet for humanity, allowing us to look at ourselves afresh.

That much is evident to the casual sci-fi viewer, or any fan of The Big Bang Theory. But you wouldn’t know that from looking at economists, strategy consultants – or much of the B2B sales literature. They suggest that people – particularly smart business people – are mostly rational decision makers, persuaded by well-established rules of scientific evidence, logic, and the inexorable rules of mathematics.

In other words – they treat buyers like Vulcans. Only trouble is, at most, they’re like Spock – half-human. And truth be told, most B2B buyers are even less Vulcan and more human than Spock.

My Brain’s Bigger than Yours

I’ve now spent four decades working with B2B sales organizations.  Lately, I’m reminded even more of how much businesspeople have bought – hook, line and sinker – the idea that customers buy through rational decision-making. The economists’ models are live and well in sales training programs.

Feeding the ratiocinating Vulcan side of buyers is necessary. But it is almost never sufficient. The true role of the intellect in B2B buying is as follows: Buyers scan options rationally, but they make their final selection with their emotions – then rationalize that decision with their brains. In other words, buying is a sandwich – rationality is the bread, but the meaty filling is a rich, emotive set of feelings, finely honed over eons of civilization.

The cognitive role in buying is vastly over-stated. Brains don’t rule. Spock is not 100% Vulcan. Neither is your customer. Not even by half.

Your Customer is Not a Vulcan

Question: What do the following things have in common? Value propositions; challenger selling; strategic fit; problem definition; pricing; negotiation; objection-handling.

Answer: In B2B sales, they usually center around analytical economic value, assuming that the rational resolution of each issue is the key to helping a buyer achieve a decision. Look for these buzz-phrases; clients buy results, show the bottom line, demonstrate value, value proposition, business case, and so forth.

Nothing wrong with that list – it’s all necessary. But it’s not sufficient. What’s missing are the things that actually trigger a buyer’s decision – not just justify it. Those include, for starters:

  • confidence that the seller can deliver what (s)he promises, and
  • the resulting ability to sleep through the night
  • integrity
  • belief that the seller will adjust their commitment to accommodate changing circumstances
  • character
  • commitment to principle
  • a long-term relationship focus
  • a sense that the seller has the buyer’s interest at heart
  • the seller’s ability and willingness to defer gratification
  • vulnerability of the seller
  • a set of values beyond the purely economic
  • a sense that the seller is a safe haven for conversation.

In short – trust in the seller.

Your customer is not a Vulcan. Your customer is barely even Spock.

The Cognitive/Emotive Disconnect

I spend my time with smart, complex-business, B2B professionals. Every single one of them will acknowledge the importance of the above list. Yet every one of them lives in an organization where 90% of attention is focused on the buyer’s Vulcan side, doing slide decks, spreadsheets, valuations and scenario0

Buyers often (rationally) screen sellers. But they quickly form favorites, unconsciously, and usually before the sellers have even had a chance to address the issue. All the Vulcan-targeted approaches are aimed either at forming a buyer’s opinion (too late, already done), or changing a buyer’s preformed opinion (already set in concrete).  It rarely works.

Proof? Ask yourself how many times your customers failed to see the brilliant case you had made, because they were somehow biased against you. You tried to sell to the Vulcan in your Spock-customer; but that human side kept rearing its ugly head.

How Complex B2B Buying Really Works

Very few buyers will tell their boss, “Gee, I guess I bought from those guys because, you know, I really trust them.” That’s career suicide. Buyers need the air-cover (and, to be fair, the reality check) of a rationality-based argument. It’s our job as sellers to deliver that rationale to them, bullet-proof and logic-tight as it can be.

Because in business, we all need to pretend we’re Vulcans.

But deep down, we all know what’s really going on. People buy with the heart, and rationalize with the mind. Brains are a necessary but not a sufficient condition. Being right, by itself, is a vastly over-rated proposition. Being right too soon just pisses people off. All else equal, a trust-based sell will always beat a rationality-based sell.

The truth is, our emotional instincts are extremely powerful (not to mention frequently accurate). We make our decisions first based on those emotions, and then struggle to justify them according to the rules of the game.  Unlike Spock, we lead with the human, and bring in our Vulcan sides as a check.

Many, many of my clients say: “That may be true for lots of people, but not for my [boss] [client] [customer]. They’re completely Vulcan, data-based, just-give-me-the-facts people. You’ve got to treat them like Vulcans, because they demand it.”  But the fact that they demand to be treated like Vulcans is 95% about ego – and that’s their human side.

Ironically, all this is especially true for those who believe the world works on brains. They are prone to buy even more emotionally, because their self-worth is tied up in thinking that emotions don’t matter – which renders them oblivious to their own human decision-making process.

Even if your customer thinks they’re a Vulcan – treat them at least like Spock. Address the human side – then give them Vulcan-food to justify their feelings.

It is curious how often you humans manage to obtain that which you do not want.

– Mr. Spock in ‘Errand of Mercy’

8 Ways to Make People Believe What You Tell Them

How do you get people to believe you?

It sounds like a simple enough problem. In business, most of us – implicitly, if not explicitly – have one answer (or at most, two). That answer is to prove it with data; and to look polished and confident while doing it.

Particularly in complex, B2B services businesses, this is the knee-jerk response. It gets applied to sales pitches, and to handling sales objections. Consultants who advise you on giving presentations will say the same thing: marshal the data, and present it convincingly. It is the approach taken to journalistic writing (at least in J-schools). It is the approach to writing legal briefs.

In consumer marketing, we can be more skeptical. Ah, those wacky consumers, they can be conned by slick TV ads and Instagram campaigns.

But in the ‘real,’ ‘hard’ world of B2B services – not so much. Surely you can’t con sophisticated audiences like the buyers of legal services, the clients of accounting firms, or the CXOs who buy from systems and strategy firms. Surely they abide by the iron-bound rules of logic and evidence. After all, they insist on the point themselves. Surely the only way to get them to believe what we tell them is to provide them with data, delivered with practiced panache.

Isn’t it?

No. And here’s why.

Credibility

Credibility is one piece of the bedrock of trust. If people doubt what you say, all else is called into doubt, including competence and good intentions. If others don’t believe what you tell them, they won’t take your advice, they won’t buy from you, they won’t speak well of you, they won’t refer you on to others, and they will generally make it harder for you to deal with them.

Being believed is pretty important stuff. The most obvious way to be believed, most people would say, is to be right about what you’re saying. Unfortunately, being right and a dollar will get you a  cup of coffee.  First, people have to be willing to hear you. And no one likes a wise guy show-off – if all you’ve got is a right answer, you’ve not got much.

While each of these may sound simple, there are eight distinct things you can do to improve the odds that people believe what you say.  Are you firing on all eight cylinders?

1. Tell the truth. This is the obvious first point, of course – but it’s amazing how the concept gets watered down. For starters, telling the truth is not the same as just not lying. It requires saying something; you can’t tell the truth if you don’t speak it. (A quick test: ask yourself if anyone believes the opposite of your claim. For example, “we are extremely high quality.” Does anyone advertise their so-so, or their low quality? If not, ditch the pitch).

2. Tell the whole truth. Don’t be cutesey and technical. Don’t allow people to draw erroneous conclusions based on what you left out. By telling the whole truth, you show people that you have nothing to hide. (Most politicians continually flunk this point).

3. Don’t over-context the truth. The most believable way to say something is to be direct about it. Don’t muddy the issue with adjectives, excuses, mitigating circumstances, your preferred spin, and the like. We believe people who state the facts, and let us uncover the context for ourselves.

4. Freely confess ignorance. If someone asks you a question you don’t know the answer to, say, “I don’t know.” It’s one of the most credible things you can say. After all, technical knowledge can always be looked up; personal courage and integrity are in far shorter supply.

5. First, listen. Nothing makes people pay attention to you more than your having paid attention to them first. They will also be more generous in their interpretation of what you say, because you have shown them the grace and respect of carefully listening to them first. Reciprocity is big with human beings.

6. It’s not the words, it’s the intent. You could say, in a monotone voice, “I really care about the work you folks are doing here.” And you would be doubted. Or, you could listen, animatedly, leaning in, raising your eyebrows and bestowing the gift of your attention, saying nothing more than, “wow.” And people would believe that you care.

7. Use commonsense anchors. Most of us in business rely on cognitive tools: data, deductive logic, and references. They are not nearly as persuasive as we think. Focus instead more on metaphors, analogies, shared experiences, stories, song lyrics, movies, famous quotations. People are more inclined to believe something if it’s familiar, if it fits, or makes sense, within their world view.

8. Use the language of the other person. If they say “customer,” don’t you say “client.” And vice versa. If they don’t swear, don’t you dare. If they speak quietly one on one, adopt their style. That way, when you say something, they will not be distracted by your out-of-ordinary approach, and they will intuitively respect that you hear and understand them.

What’s not on this list?  Several things, actually. Deductive logic. Powerpoint. Cool graphics. Spreadsheet backup. Testimonials and references. Qualifications and credentials.

It’s not that these factors aren’t important; they are. But they are frequently used as blunt instruments to qualify or reject. We’d all prefer to be rejected or disbelieved “for cause,” rather than for some feeling. And so we come up with rational reasons for saying no, and justifying yes.  But the decision itself to believe you is far more likely driven by the more emotive factors listed above.

Now – this blogpost was written about B2B services businesses. Just for kicks, try going back and reading it as being about congress and politicians. Does that shed any light on trust in government?

 

When the Client Demands Price Cuts

We’ve all been faced with that dreaded moment when a potential client – or even an existing one – demands a price cut. While some basics about price cutting are the same, there are unique versions of this problem facing those of us in advisory, services businesses.

Does this one sound familiar to you?

———–

“A long-standing client came to us and said our price was too high for a job we quoted. They said one competitor was priced 20% below us, and another 30% below. We’re seeing this a lot; word is we’re the high-priced firm in this market, and we’ve lost a few big jobs. It seems to be pretty much a question of price. This business is getting commoditized. Particularly in this economy, we need to seriously consider cutting prices. But our margins are already low.”

Have you heard those words lately? Perhaps spoken them? Before you act, make sure you investigate the situation. This article gives you a structured approach to doing so—looking at causes, solutions, and handling discussions.

CAUSES: WHAT DRIVES CLIENT DEMANDS

Before you respond to demands for price, it is useful to understand what lies below such demands. Three things drive the vast majority of client demands:

  • Fear—the simple fear of being taken advantageof. If clients perceive that someone else is getting a better “deal,” they can quickly feel abused, and may react very negatively. Clients who feel abused become very creative about attributing causes—your rates, your profits, your margins, and so forth.
  • Miscommunication—usually around scope and design issues. The “apples and oranges” problem can arise from many project design issues, including the scope of issues addressed, the leverage of your team, the depth to which issues are explored, timing, and choices about staffing. If the client orders an apple and you price out an apple pie, the client may think you are charging absurd margins on fruit.
  • Quality—misaligned assumptions about quality required. Many service providers make an implicit assumption about the quality required for a certain kind of work. Often the client doesn’t perceive the need for the Cadillac/Mercedes solution—they think a Chevrolet/Volkswagen will do just fine. And often, it will.

Clients demanding price concessions don’t present the issue in these neat terms. They simply say, “your price is too high, and you need to cut it.” Listen carefully – this does not mean that your price is too high. Nor does it mean you need to take drastic action. But you’d better investigate what’s going on.

SOLUTIONS: FIX THE RIGHT PROBLEM

When your client demands a price concession, she usually assumes that rates, costs and profit margins are the problem. Few clients (or providers) challenge this assumption. The client thinks she is being taken advantage of by a voracious provider. The provider feels pressured by a callous client playing him off against others. Both then cast the issue in terms of greed and motives, and dig in for tough price negotiations.

But rates and margins are almost never the real problem. The real problems lie in design issues and in misunderstandings. The worst thing to do is negotiate on a total price alone – it makes the client think you’ve been hiding something, and wonder if he should ask for even more. Too often both parties try to negotiate price—when they should be discussing design. To see why rates are not the issue, consider your economic model. The building blocks of a project bid boil down to:

  • The firm’s costs—i.e. compensation levels
  • Rates—a function of cost, utilization and margins
  • Project design scope
  • Project design leverage
  • Project design quality

Now ask yourself—how does my competitor’s model differ from mine, and what is he cutting to get his prices 30% below mine?

Compensation costs vary hardly at all. The salary market is extremely competitive. Nor do firms vary much on billing rates, utilization and models. None of it is enough to explain a competitor’s 30% discount. That leaves two explanations: either the projects being discussed are just not comparable – or your competitor will lose money on this bid. The discussion you need to have with your client explores both options – in that order.

HANDLING THE PRICING DISCUSSION

Above all, clients want to know they are being treated fairly. Doing so starts with a fair price for work done, and the willingness to be open about how you arrive at that price. Very few clients actually want to pay an unfair price to a provider who has dealt fairly with them. Here’s how to have that discussion. 1. Commit to resolution. Make sure you spend enough time understanding and empathizing with the client’s concerns. Say you’re committed to finding a mutually acceptable resolution—and mean it. 2. Suggest a series of price drivers—from scope and quality concerns to economic drivers—and commit to exploring each in turn.

  • Start with scope and design issues. Ask the client to compare in detail your project design with the competitor’s. That means nailing down modules, scope of research, staffing levels—everything that might be different. Then compare. More than half the time, discussion will stop right here. Most fears are simply misunderstandings of design.
  • Move on to quality issues. Determine whether quality in your proposal is higher than that proposed by a competitor. If so, then ask whether the client is willing to pay for extra quality—or not. If the answer is “not,” be ready to scale back or walk. Your “standards” may be costing you business.
  • If the issue is not yet settled, then put your structural economic cards on the table. Tell the client your billing rate structure, base compensation structure, leverage model and utilization rates. Explain why these numbers add up to a fair profit model for you, and why they probably don’t vary much by competitor—certainly not 30%.

Now you can face the competitor 30% discount head on. Confirm the project design is comparable. Say to the client, “I believe their economic model is similar to ours – and we could not sustain a 30% discount. How long do you believe you will continue to get that discount? And are you willing to switch again if and when they move to sustainable prices?”

If the client would be willing to switch yet again to find yet another discounter, then you should probably walk away and find a relationship buyer. If so, walk away smiling – your competitor just lost money, and you didn’t. Price negotiations don’t have to be about power and control; trust and openness go a very long way. Most clients are happy to pay a fair price to a provider they trust. Just give them the information with which to trust you.

Should you ever cut price? Yes, in two cases. The first is for a volume discount, including existing-client discounts. In these situations, your cost of sales is genuinely reduced; that’s real money, and can be shared. The second reason is to buy your way into a new business or client. Don’t do it lightly. Eventually you will have to raise rates to sustainable levels; and a client who switched to you on price is prone to switch again.