The housing market is enjoying some good tailwinds, which typically mean positive things for residential construction.
Every builder or remodeler has been there, or will be someday: The contractor has done his or her best to complete the job as agreed, but the customer is not satisfied. Settling the disagreement is a painful challenge that will require sophisticated ne...
Every builder or remodeler has been there, or will be someday: The contractor has done his or her best to complete the job as agreed, but the customer is not satisfied. Settling the disagreement is a painful challenge that will require sophisticated negotiating skills.
In this and the next five issues of Professional Builder, we will help builders develop those skills, using techniques that have proved successful in the Home Builders Institute course on negotiating skills. We will lay out a typical scenario, then explore how the conflict can be resolved.
The benefits of better negotiating skills are many. You will be able to maintain control, so you won’t have to turn to lawyers and others to resolve conflicts. You will reach better solutions than an outsider might impose, and they will be easier to implement. You will settle problems in less time and with less effort and less cost than would be required if an outsider were involved, increasing your productivity and profits. You will improve important relationships and enhance both your reputation and your sense of professional achievement. You will reduce stress and frustration and, most likely, the number of future conflicts.
This course will not teach you how to eliminate conflicts or how to resolve all conflicts quickly. You will not learn how to trick or manipulate customers. You will not learn everything there is to know about negotiations that can take a lifetime but you will get a solid foundation upon which to build. You may not be able to avoid all lawsuits and arbitration cases, but you will be able to minimize them.
Negotiation is essentially the give-and-take discussion that leads the builder and customer to a mutually acceptable solution. This course goes a step beyond that to deal with constructive negotiation, where the outcome is not merely mutually acceptable, but is perceived as one in which both sides win because each side considers the other’s needs.
The Constructive Approach
How good are you already at constructive negotiation? Look now at the accompanying checklist, and mark each phrase that describes your approach to negotiations. If you have more checks in the first column than in the second, you are well on your way.
Constructive negotiation is distinct from both soft and hard approaches to negotiating. Here are some of the differences:
- The soft negotiator seeks to establish an amicable climate.
- The hard negotiator tries to distinguish his or her position from the other party
- The constructive negotiator tries to create a cooperative climate.
- The soft negotiator treats the other party as a trusted friend.
- The hard negotiator treats the other as a distrustful adversary.
- The constructive negotiator regards both sides as joint problem solvers and proceeds regardless of trust.
- The soft negotiator is willing to make concessions and change positions easily. The hard negotiator demands concessions and makes threats. The constructive negotiator separates the people from the problem and explores each side’s interests.
- The soft negotiator communicates openly and discloses the minimum acceptable outcome. The hard negotiator communicates strategically and exaggerates the minimum acceptable outcome. The constructive negotiator communicates honestly but cautiously, firm on his or her interests but flexible on ways to reach a solution. There are other differences, as we shall see in coming months as the course continues.
The Five C’s
Constructive negotiation is accomplished in three steps: building a foundation, exploring the possibilities for a solution, and seeking agreement.
The actions in each step are guided by five general rules, called the five C’s. They seem simple but, in actual negotiations, the five C’s can become complicated.
- Concentrate on each side’s interests. Define the nature of the problem and the possible ways to resolve it.
- Create an appropriate climate. This means each side should do whatever is necessary to carry out an efficient, effective process, channeling emotions toward solutions rather than greater conflict.
- Communicate clearly. Make sure each side understands the other’s position and eliminate any barriers to that understanding.
- Carry out a practical process. This means concentrating on whichever step the process is in, be it foundation building, the exploration of options or the quest for solutions.
- Consider your effectiveness. This means evaluating your own actions or words to make sure they are directed at achieving a solution.
Negotiation involves real people, of course, and so it is never quite so segmented as the five C’s might suggest. Nevertheless, by keeping these principles in mind, the negotiator will go far toward achieving success. We will see, in coming lessons , how all these things work together.
The Case Study
Robin, a social worker, lives in an older house in a pleasant neighborhood. Robin hired Chris, a builder and remodeler, to build a 20-by-20-foot screened porch that Robin has wanted for years. Robin’s and Chris’s spouses work together, and they have met on several social occasions. The contract was for $12,000, of which $4800 was paid when the job was about half done. The job is now just about finished, and Chris has requested another $4800 payment this week. The last $2400 is to be paid 30 days after completion of the job.
Robin’s View: Robin wants some issues settled before another penny is paid. Robin believes that there has been one problem after another on this job involving materials and workmanship. Robin has tried to be cooperative, but feels that Chris has taken advantage of Robin’s good will. Robin has been especially uncomfortable since a neighbor visited and described the workmanship as poor and the price as $2,000 too high. Although most of the problems have been solved, Robin is ready to get tough if necessary.
The porch was built from a floor plan and a set of specifications that both parties now agree should have been more specific and included a lot more detail. There have been numerous disagreements over design details and materials choices and in most cases Chris has made the changes that Robin requested. Robin has let pass some problems that would have been extremely costly for Chris to redo.
Last week Robin made a punch list of remaining tasks after Chris said the job was about done and wanted the second $4800 paid this week. Chris has now completed the punch list, except for replacing the T-111 siding on the knee wall around the porch.
Chris says that the T-111 siding was as called for in the specifications and was applied properly so replacing it is not Chris’s responsibility. The specs indeed called for T-111 but did not specify whether the grooves should be 4 inches or 8 inches on center. Robin wanted 4-inch grooves and had drawn a vague sketch but did not write 4-inch on the drawing. Chris purchased and installed the 8-inch material before Robin saw and approved it.
Robin thinks the 8-inch material looks cheaper than 4-inch material. Robin remembers telling Chris that 4-inch material should be used. If Chris will rip out the present T-111 and replace it with the siding Robin prefers, Robin could use the slightly damaged material to build a child’s playhouse.
Robin’s other problem is that this job was supposed to be finished three weeks ago. Robin asked Chris not to do any work for a week while Robin was on vacation (so that Robin could keep up daily supervision on the job), but this doesn’t justify the other two weeks of delay. Robin had planned a barbecue on the new porch for co-workers but had to hold it at a private club instead at a cost of $250. The switch was an embarrassment and a lot more work, and Robin wants the Chris to reduce the final payment by $250.
The porch is a major investment for Robin, who doesn’t make much money as a social worker. Robin worked as a carpenter for a construction company during summer vacations while in college, and remembers the practice of often overcharging customers.
Robin acknowledges being picky, but wants the job done right, with full value for the money being paid.
Chris’s View: Chris agrees with Robin about the basic facts of the case, but that’s about all. This has been a job Chris regrets ever accepting. Robin has champagne tastes and a beer budget. For example, Robin wanted to use lower-grade lumber to save money, then demanded those pieces with splits and knots be replaced.
Because of all the problems and changes, Chris is not making a profit on this job and just wants it done. Moreover, Chris feels unappreciated for all the extra effort put in to get the project built on a limited budget.
Chris is willing to replace the T-111, but only as a separate contract. Chris estimates that the new material and trim would cost $150, and wants $350 to install it, for a total of $500 without overhead or profit.
Chris acknowledges there was a sketch showing the siding, but it was not to scale. Chris does not remember Robin saying anything about the spacing of the grooves. Chris plans to ask Robin to supplement the original contract as compensation for all of the extra effort. Chris has spent hours returning materials to suppliers, getting special items, redoing work, and talking out every detail with Robin. Chris has had to do work that, on another job, employees would have done.
Because Chris’s crew didn’t work on Robin’s job while Robin was on vacation, and no other jobs were ready, Chris had to pay employees to work around the shop. Chris figures that the job has cost $2000 more than estimated when the contract was drawn up, and that doesn’t even include money that could have been made if the time were spent elsewhere. Chris wants at least $500 more on this contract, even though that’s not enough to compensate for all the expense and aggravation.
The Solution: Clearly, both Robin and Chris have legitimate grievances. How can they solve them? They can go to court. They can hire a mediator to seek a solution or an arbitrator to impose one. But they choose, wisely, to try constructive negotiation. In future lessons we will see how that works.
This material is based on the course Negotiating Skills for Master Builders and Remodelers, developed by the Home Builders Institute, the educational arm of the National Association of Home Builders. The article was written by Darl G. Williams, MIRM, President of Strategic Sales Development, LLC, of St. Joseph, Michigan. SSD offers consulting, training and marketing services to suppliers and builders. SSD is an affiliate of Marketing Partners, Inc., of St. Joseph, Michigan; a full-service marketing company dedicated to helping people succeed. Williams spent 30 years in the housing industry and is experienced in sales, sales management, training and strategic planning.