When Negotiation Becomes Dishonesty

Written by Dana Oshiro / February 8, 2010 7:35 PM / 5 Comments

This post is part of our ReadWriteStart channel, which is a resource and guide for first-time entrepreneurs and startups. The channel is sponsored by Microsoft BizSpark. To sign up for BizSpark, click here.

If you've been a geek your whole life then you understand the term "Canadian girlfriend." The Canadian (or sometimes British) love interest is the person you talk about when a member of the opposite sex inquires about your dating status. The story is that you met online, you've formed a solid bond and you'll probably break up with your online girlfriend when a girl in your vicinity decides she likes you. The idea is to drive up the value of your perceived social stock. In the startup world, the same principle is used in "ham and egging."

As pointed out in a recent blog post by university professor Scott Shane, "ham and egging" was first coined by Columbia's professor Amar Bhide and Harvard Business School's Howard Stevenson. The term refers to the technique of convincing multiple stakeholders that others are working with you despite the fact that you're only in talks. The only problem is that most early partners only want to work with you if other reputable partners have already signed on.

Explains Bhide and Stevenson,"the ultimate ham and egging solution is for the entrepreneur to simultaneously convince each participant that everyone else is on board, or almost on board."

However, when ReadWriteWeb spoke to MobiTV CEO Paul Scanlan about forging deals between telecom and television companies, he suggested a different tact. Although Scanlan found himself caught between partners who were skittish to sign on without the initial validation of others, he decided that rather than ham and egging, he'd build contingency clauses into contracts. Scanlan's contracts stated that all partnerships were contingent on a set number of large-scale partners to launch. While this may not be the ideal method of closing deals, it seems like an ethical alternative to engaging in deals that begin with dishonesty.

Have you ever engaged in ham and egging and if so, was your deal a success?

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Comments

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Dana, I don't believe this strategy is new, its used all the time in business (or elsewhere) when you have to bring together a disparate group of stakeholders within a company or a group of companies to buy into your initiative.

They are all waiting for "something to happen" to break the sitting around or when the stakeholders have different competing agendas. A smart innovator uses his/her skills in convincing one or two key stakeholders that getting on board with the plan is in their best interests, the greater good, or "xyz" reason. Once these key companies get on board its dam breaking open. Now everybody wants to be part of the group, the don't want to be left out.

Its a bit easier if this person has credibility within his company or his company has it within the industry. If not, the job is more difficult and other inducements may be necessary.

Posted by: Gary | February 8, 2010 10:21 PM

I should have added my comment was addressing the study by the biz professors and not the title of yr. post...

Posted by: Gary | February 8, 2010 10:23 PM

Hi,
Very informative post.The two negative emotions that have been found to affect negotiations most often and most dramatically are anger and fear.Thus, identifying negotiation situations and subjects that trigger anger and fear is a very important first step in learning to deal with such emotions. Anger can be triggered by violating rules or assumptions and by threats to our identity....

Posted by: r4 games | February 9, 2010 12:42 AM

This "technique" is just lazy and stupid. Experienced negotiators can almost always tell when someone is inflating the status of alternate discussions. Startups are often negotiating with more experienced parties in their field (VCs, large companies), so it is absolutely foolish to try to do this.

It is really hard work to legitimately advance multiple discussions, but that is the only way to gain true leverage against more powerful negotiators.

Posted by: ginsu | February 9, 2010 10:41 AM

Very interesting. I am not sure I agree that it is immoral or unethical though. The line between saying "I am also talking to X" versus, "I am already working with X" is a very fine one indeed, and it is very tempting to step over. Especially because the honest statement sounds so weak.

When you negotiating on multiple tracks in a buyer's market, and you are the seller, this is unfortunately a structural disadvantage that you can't really mitigate.

I'd like to hear about solutions to the problem that the poor ham 'n egger is trying to solve when he/she succumbs to the temptation to use this tactic.

In a sales situation, one way to manage this is to do a 'spiral.' Do a loss-leader giveaway to a fairly easy client, and then bootstrap your credibility that way. A buys because B did, and C buys because B did. And so on. Dominoes of closing.

Venkat

Posted by: Venkatesh Rao | February 17, 2010 6:43 AM