A Case for Anchoring and a BATNA in The Construction Industry
Noa Sheer Interviews Her Very First Client
“There’s always more value to be had in any negotiation, it’s just about extracting that value”
In 2015, when Fred McNeil was at Ganellen Property Group in Sydney, he embarked on a negotiations training course taught by Noa. Now, ten years later, Noa connects with Fred, Projects Director at Orwell Construction. They reflect on and discuss some of the key learnings Fred has continued to use on a daily basis in his construction career over the last 10 years.
Meet Fred - an experienced negotiator in construction with more than a decade’s worth of negotiation wisdom. In 2015, Fred met Noa when Noa presented an advanced Negotiation Skills course at Ganellen, where he worked as a project manager. Ganellen had requested that Noa adapt her university course in Negotiation to suit the fast paced everyday negotiation needs of the company, and from this request - Sheer Negotiations was born.
Since that course Fred has developed a negotiation style that works for him and is not performative. He genuinely seeks to increase value for all parties involved and build the relationships that continue to create value over time. With the learnings in negotiation strategy and his experience he has moved away from competitive tactics towards collaborative trust building strategies and relationship-centric methods.
Key takeaways from their discussion include:
Building Trust (0:52-1:08):
Fred emphasises the importance of integrity and consistently following through on commitments (1:17-1:34), as well as tapping into the personal side of relationships. He reflects on the value he has seen in spending a few minutes at the start of each conversation to genuinely connect with people, and actively listen to their responses, sometimes taking notes to remember details for future interactions (1:38-4:24).
Negotiation in Construction (6:40-7:58):
Fred explains that negotiation tactics vary depending on who you are dealing with:
Clients: Negotiations are often rights-based, legal, and technical due to multi-million dollar contracts, with less emotional connection.
Consultants: Easier to build rapport and leverage the relationship for added value.
Subcontractors: This can be cutthroat, but the industry has seen changes, especially during and after COVID-19. The power dynamic shifted, requiring builders to develop a "soft side" as subcontractors became scarce (8:31-9:29). Fred notes that the industry is evolving away from the "bash-bash" approach towards more collaborative, win-win deals (9:57-10:35).
Fred’s Best Tips for Negotiating with Subcontractors (11:20-11:30):
Preparation is Key: Never go into a meeting blind (11:31-11:43).
Have Options and Alternatives: Always have a Best Alternative to a Negotiated Agreement (BATNA) to know your walk-away point (12:08-12:28).
Ask Questions and Use Statements: Go through quotes and scopes, asking clarifying questions or making statements that imply inclusions (12:37-13:01).
Bargaining Mix: Understand the value of different items in a deal. It's not just about one price; there are multiple negotiable items (13:04-13:40). Fred uses the example of offering a parking spot to change the overall value of a deal (13:41-14:00).
Anchor Early: Throw out an anchor price early in the conversation to set expectations (14:21-14:56).
Collaborate: Work together with subcontractors, even sharing screens to find a solution that works for both parties. Emphasise that you don't want them to lose money (15:16-15:51).
The Evolution of Fred’s Negotiation Style (17:04-21:15):
Fred describes his initial approach as purely factual and contract-based, especially when he was new to Australia and without existing relationships. He used to believe in aggressive tactics for one-off transactions, like buying a car, however he has learnt that there's "always something left on the table" and "other value that could be taken out of it." He realised that even in seemingly one-off transactions, there are opportunities to find value beyond just the price, such as getting a full tank of fuel or extra mats when buying a car, or a discount at a restaurant by bringing in a large party on a slow night.
This shifted his perspective from a "one good for one good" mindset to "mining" for more information to extract more value for both sides (21:16-21:24).
Fred concludes by stating that these updated negotiation techniques are now passed on to younger team members in his business, proving that they work and make things easier, avoiding constant arguments (21:40-22:10).
Noa emphasises that the collaborative approach, while sometimes seen as naive, increases one’s gains and aligns with Fred's personality (22:58-23:10).
In Summary
It’s worthwhile to invest some time in reviewing your negotiation approach and style. We may be negotiating in the way we presume we should, without reflecting on whether it brings us maximum benefit. There may be a better way, more comfortable or aligned with our values, that can bring us better deals and better relationships.
One way to review your approach is to participate in a Sheer Negotiations workshop, where through simulations and exercises you can trial new methods, compare your performance with others’ and compare one approach with another. We thank Fred for demonstrating the power of continuous development of negotiation skills. Head to Orwell Construction (https://www.orwellconstructions.com.au/) to see the outcomes of Fred’s work.