
Stuck in negotiations? Try Hootsuite's steak dinner clause - Quartertotravel
https://medium.com/@invoker/how-to-use-the-steak-clause-to-win-your-next-negotiation-55b4dafbea94#.209lnhyg8
======
dpiers
I highly recommend _against_ doing this if you work at any sort of real
company. Negotiating trips/dinners/tickets in a contract means there was extra
wiggle room and you chose free stuff over getting the best deal for the
company. There's a fine line between a business courtesy and a kickback, and
you don't want to end up in a situation where someone is questioning if you
crossed that line.

The benefit they listed - building the relationship with the vendor - can be
valid, but should/could exist as a regularly scheduled dinner that is expensed
through normal policies.

~~~
SmellTheGlove
Neither side was willing to shoulder the fees. Eventually one side did, but
threw this in to mitigate any ill feelings as a result of the negotiation and
contract terms. This isn't instead of a fee split, this is Hootsuite blinking
first but throwing in an additional term meant to be fun and healthy to the
relationship. A $450 dinner every $100k in revenue is de minimis (or whatever
is below that, I slept through law school latin) and to me was a great
solution to the relationship aspect.

This is neither a business courtesy nor a kickback. It's a negotiated term in
the contract.

~~~
dpiers
Hootsuite could have used taking on the CC fees as leverage for obtaining a
concession on a different point. Instead they negotiated a clause that
benefits individuals, and not the company.

If I were an investor in a company and they accepted suboptimal contract terms
because of terms that benefited individuals and not the company, I'd be
unhappy. If they promoted it as a best practice, I'd be livid.

~~~
SmellTheGlove
We can only go by what's written in the article, but it sounds like the CC fee
was the only item at issue. Hootsuite was willing to budge on it and
essentially had the vendor put business development activities into the
contract. I agree that it does start to look like personal services, and I'd
not be happy about it if it were something larger. But the vendor was buying
dinner every once in a while anyway - why do you think they agreed to it? And
while Hootsuite maybe could have leveraged that term for something else in the
contract, it sounds like they're very happy with their end of this. It'd be
one thing if the Vendor was promoting this, but it's the party that conceded
the larger term thinking it beneficial. It's certainly a YMMV situation.

------
erdevs
The thing that unstuck the negotiation was _conceding_ to the disputed term
(agreeing to pay the credit card fees). The "steak dinner" trick seems to have
little to do with it.

Basically this boils down to "if you're stuck in negotiations but really want
to wrap up the deal, consider just conceding on the final, minor points in
contention. Maybe try to get something small in exchange for your larger
concession(s)."

Not exactly earth-shattering and the hubris in even glancingly comparing this
to the brilliance of Nash's work is astounding.

On top of that, this counter-concession doesn't even scale up with increasing
revenue. But Hootsuite's fees do increase as revenue increases.

I think it'd be more interesting to read a negotiation tip from the vendor in
this situation. Something like "if you've already worked out the major terms
in a deal and you are fairly confident the counterparty wants the deal done,
but you are stuck on a final point that affects you more than them... consider
standing firm, even to the point of obstinance. Test the limits and see if you
can get them to concede. If they're holding out, see if you can offer
something trivial in exchange for their concession or if you can get them to
make an offer to concede in exchange for some trivial ancillary benefit.
Sometimes this works as people are irrational and just want to feel they
'gotcha', even if what they're conceding is of greater value -- and has the
potential to be of _far_ greater value-- than the exchange. All the better if
you can make them feel like they're oh-so-clever in the proposal. We once had
a partner we were negotiating with agree to cover credit card fees which
would've hurt our net revenue share substantially, simply in exchange for
agreeing to buy them a steak dinner once a quarter, which we likely would've
done anyway to keep this important partner relationship moving forward and
growing over time. Ha! We made sure to cap the price of the steak dinner and
merrily signed, having won the business concession we needed."

Besides not even being a great or meaningful technique in practice and
certainly not defining any new theoretical work of import (unlike Nash), this
is also mildly unethical and would reflect poorly and/or get the practitioner
in trouble in many, if not most, situations.

It is sad to see the comments on Medium cheering "brilliant, man!" and "love
this."

~~~
oxryly1
> The thing that unstuck the negotiation was conceding to the disputed term
> (agreeing to pay the credit card fees). The "steak dinner" trick seems to
> have little to do with it.

No, a concession would be if they just ate the credit card fees. The "steak
dinner" was the fair value trade for the credit card fees.

~~~
erdevs
It is enjoyable to negotiate with people who view "concession" in this sense.
You can get them to agree to terms of greater business value in exchange for
terms of smaller business value, and they don't even think they "conceded" a
thing!

It's a concession. Hootsuite didn't want to cover the credit card fees. But
they ended up doing so. There wasn't even a proportional split (eg "let's each
cover our portion of the credit card fees, according to our revenue share
split") or a split of any kind. There was a separate concession by the vendor
to cover steak dinners (of lesser value, and only a _fixed_ cost) in exchange
for Hootsuite's credit card fee concession... but that does not somehow make
Hootsuite's concession a non-concession.

In any case, no point in debating terminology. Hootsuite gave up more value
than they gained, but both parties got the deal done and are happy with it, so
they made the right call in the end (conceding vs blowing the deal up). It's
just not an amazing or widely applicable negotiation technique and, if
anything, the vendor likely employed the better technique here.

~~~
gregmac
Maybe in a couple months we'll see the reciprocal article: "How we saved
thousands of dollars of credit card fees by paying for a couple steaks"

------
davidu
This is not an acceptable practice and it's surprising a deal desk or CFO
would sign off on this.

Credit Card fee negotiation results in a benefit or cost to a company. Steak
dinner is a benefit to an individual. "Relationship building" activities are
important, but should be treated separately and unrelated to contract
negotiations and deal terms.

~~~
mindcrime
_Credit Card fee negotiation results in a benefit or cost to a company. Steak
dinner is a benefit to an individual._

But it wasn't a specific named individual in the contract... it was "Two
Hootsuite representatives" (presumably to be chosen by someone with decision
making authority at Hootsuite). I would say that changes the dynamic, as it's
not like the person negotiating the contract negotiated a steak dinner for
_themselves_.

~~~
davidu
It doesn't matter meaningfully. While you're right that it changes the dynamic
in the consecration of the terms, it doesn't change the deal drivers and the
benefit shift in the execution of the contract.

------
dimino
The comments here demonstrate one way in which larger companies are not as
nimble as smaller companies. I feel like no one read the part where Hootsuite
got a substantial amount of additional business from the client as a result of
regularly scheduled meetings in a semi-informal context.

The gamble here is exactly what seems to be getting missed -- paying the
opportunity cost of additional gains during negotiation, and in return
receiving more face time with a current client, who might offer additional
partnership chances later.

This isn't suggesting you trade your services for dinners, it's suggesting you
gamble on yourself by embedding semi-informal regular meetings with your
clients into your contracts. It doesn't have to be a steak dinner, your client
doesn't have to be the one paying, what matters is the social bonding with
current clients to expand your relationship with them.

~~~
jessaustin
I think some readers might have been confused by the fact that TFA called the
other party a "vendor", when they might be more properly called a sales
channel. HS is like a tiny little Chinese manufacturer that has somehow gotten
Wal-Mart to pay for a regular steak dinner, at which the diners discuss how
the manufacturer might get more stuff on Wal-Mart's shelves. So this clause is
definitely a win for HS.

~~~
dimino
I like to imagine Hootsuite's contracts are comprised entirely of what they'd
buy with their money, rather than for the money itself.

"And on the 4th day of each month, you agree to send us six rolls of toilet
paper, double ply. In addition, you will send six boxes of napkins, as well as
four boxes of tissues."

It... kind of cuts out the middleman, right? I guess?

------
SmellTheGlove
As a tech guy turned lawyer turned tech guy, I loved this. It's a really
creative solution to mitigate hurt feelings over contract terms.

Yeah it's a small term when conceding a big one, but it goes beyond dollars to
something that's really important to smaller companies building relationships.
I wouldn't expect to see it at a Fortune 500, but I don't have a problem with
it at a smaller company.

* Disclaimer: I'm not your lawyer, this is not legal advice, I reserve the right to be a dog masquerading as a lawyer online.

EDIT: I've read some of the other comments and I don't think I love it - I
still like it though. I'm just not in love with it :)

------
Analemma_
Every year at my company we are required to take a business conduct standards
course that says, in no uncertain terms, that you will be fired if you do
this.

~~~
jandrese
It's interesting how these well intentioned ethics regulations can impede
relationship building. Because you can't do this you don't get the regular
updates with the client and potentially more business.

~~~
erdevs
I doubt the business policy is that you can't take partners out for meals
and/or invest in relationship building via meals and entertainment
expenditures. Nor is the policy likely that you cannot participate in such
activities when offered by the partner.

The key is that you should not _exchange company resources_ for what may be
_perceived as or actually be personal benefit_. Outside a contractual term,
set up a quarterly dinner to strategize, synchronize, assess, etc where the
vendor pays? Sure! But, explicitly concede a material business term in a
contract in direct exchange for a term that personally enriches you? No!

~~~
guntars
There is something to be said about this dinner being a part of the contract
which makes it impossible for the vendor to weasel out of it. Not sure what's
so special about this particular vendor, but a guaranteed recurring facetime
with an important partner seems worth a few thousand bucks paid in fees.

~~~
ethbro
I think it accomplishes a few things: recurring facetime, but also physical
awareness of the magnitude of the point. If the vendor suddenly starts doing
$500,000/month, both parties notice "Gee, we're going out to dinner a lot more
than we used to." That seems an important fact to highlight.

------
pc86
I expected this to be a way to end constant changing of the contract: the last
party to modify a contract treats the other party to a steak dinner
immediately after closing.

~~~
ThrustVectoring
That would actually be relevant to the game theory stuff that got referred to
at the start of the article, too. It changes what the alternative to the
status quo is, which will materially affect negotiations.

------
erikb
Wow, it seems nobody from the comments actually got what this is about. It is
about thinking outside the box to finding something else. This is a very
reasonable and common bargaining tactic. Yes there are situations where this
doesn't apply, like when you make a deal about card fees as representative of
a company you don't own. But this can be applied in so many other situations.
E.g. you or a colleague discuss who should debug that one ugly thing you both
didn't want to touch. And in exchange for submitting to the bad task you ask
your colleague to not go to the sports bar on saturday but to the cinema.

TL;DR it's valid practice. Please read the article again if you don't think
so. (not the author)

------
paulsutter
I can think of few things more unbearable than dinner with a vendor.

But the real question is, who is so bad at negotiation that the two sides dig
in on a silly issue like this? If anything, this is a sign the deal should be
dropped.

> For some reason, neither side was willing to budge on this small detail. We
> wouldn’t pay; they wouldn’t pay; and no one was willing to split the
> difference

------
duck
Wow, every single comment here misses the fact this advice is coming from the
CEO and founder and is for other CEO/founders. I don't think he is telling
some Jr. Marketing Associate to do this, but rather as a founder you have to
think outside of the box sometimes and giving up money for a stronger long-
term partnership is one of doing that.

------
eggoa
Don't try this with a government contract.

~~~
xiaoma
Many government arrangements that work exactly like this.

~~~
xigency
Yes, mainly in countries with massive corruption or in general, illegally.

------
_Codemonkeyism
Working for some large corporations, my guess is some compliance officers
would not like this.

~~~
to3m
I suppose this is one of the advantages of running your own non-large
corporation: you can do pretty much what you like.

~~~
weinzierl
It's an advantage only as long as you solely want to make business with other
small businesses.

All large corporations I ever dealt with pass down their full suit of
compliance regulations down to the last company in the chain - regardless if
it's small shops or even single person shops.

Besides the business conduct and compliance papers (no bribery like steak
dinners) you quickly end up needing a code of conduct, an environmental policy
and a social sustainability policy. You will need a policy that you respect
human rights, a policy against forced or compulsory labour, a policy against
child labour, etc. And you'll need to designate an officer for every topic,
and you'll need to prove that you train your employees in every topic.

~~~
johnward
The fact that some of those things are needed is insane to me but you are
correct.

------
xigency
This is somewhat risky as it can look like a form of bribery. I'm wondering
why they were making large purchases with a credit card in the first place?

~~~
noxToken
I don't think this constitutes bribery. The credit card fees would have to be
paid by either the author's company or the vendor. They reached a deal where
the vendor would "refund" a portion of the credit card fees based on revenue
milestones in the form of dinner.

The author's company's product is social media education. To get their product
out, the author's company used vendors to sell the product. The credit card
purchase would come from the customer as a transaction to the vendor. Since
the vendor was the seller, they would normally be responsible for the credit
card fees.

The vendor didn't want to pay the credit card fees, but the author's company
didn't either. That's where the impasse came in.

~~~
xigency
Gotcha. The credit card fees are related to the customer.

------
grabeh
This shows the problems that can be caused when an overlooked issue is dropped
into a negotiation late in the day. Both parties may have invested emotionally
into the negotiation and consider they have conceded on a range of issues
already and so are extremely hesitant to concede again.

As mentioned, the rational way to approach would be to assess the potential
profitability of the deal from both sides, and come to an agreement on that
basis.

Of course, negotiations do not take place in a vacuum and rational solutions
to an impasse are not always taken up (partly because of the above emotional
investment and the fact that you are negotiating with humans, not robots).

It's not as simple as saying this constituted a failure to act in the best
interests of the company. Negotiation shouldn't solely involve a cold, hard
calculation of the costs and revenue that may stem from a specific deal
because there are other factors to take into account: goodwill, chance of
repeat business, the general relationship with the other party.

Certainly I've felt that negotiators on the other side from me have
deliberately looked to dig in their heels because they know that one result
could be that the other side will simply concede out of frustration and a
desire just to get the damn contract signed. The downside to that approach is
that leaving one side frustrated at the outset of an agreement is not always a
good recipe for a solid working relationship!

In HootSuite's case, conceding is sometimes a necessary evil to get the deal
done. In my shoes, I would say getting the other side to agree to a steak
dinner is a nice way to deflate any perceived frustration. Expenses are
frequently covered off in agreements and this would be absolutely fine under
UK bribery laws at least.

~~~
mjevans
Most humans aren't rational though. Even those of us that try to be more often
can still be sabotaged by our emotions working against us, instead of for us.
I suspect 'gut' emotional feelings are an good side channel for reaching
desirable outcomes usually more quickly or in more cases than logic; which
would explain why we evolved to have them.

------
hammock
Not that unusual. It's extremely common for vendors to wine and dine
clients/prospectives. And even in contracts you often have quarterly reviews,
etc which are at least half as much about getting together for
dinner/entertainment as they are about the actual review. It's basic
relationship building stuff

------
walrus01
The most hilarious thing about hootsuite is that it is sometimes touted by
technology press as the biggest/best/most prominent technology firm in
Vancouver. Compared to the companies in Seattle or SF it is a joke. And so is
the Vancouver job market.

------
ultrasaurus
I hoped this was going to be about internal projects. A few times the
proponent of a change at PD has bet that the metrics would prove them right --
if not, they'd buy the other side of the impasse dinner.

------
DefaultUserHN
If you're frequently stuck in negotiations, I would also recommend reading
"The Art of the Deal" by Donald Trump.

------
andrewljohnson
I forget the source, but I read an article I liked once-upon-a-time about how
startups should focus their innovations on their core products, not trying to
revolutionize every business practice they come across.

Maybe more time spent innovating on software, less time on contracts.

p.s. HootSuite is no CoSchedule. We tried both and wow is CoSchedule better at
all the things.

