Hiring, Promotion, Raises - The Three Decisive Factors

ACTUAL CASE HISTORY: InterActive Corporation is an internet giant, often mentioned in the same breath as Google, Ebay and Amazon.com. It's headquartered in New York City, has over $2 billion in annual revenue, and represents a stock market capitalization in excess of $16 billion (Nasdaq stock symbol IACI). Between 1999 and 2004, its Chairman Barry Diller built InterActive into perhaps the first "internet supermarket," having acquired such varied and leading internet companies as Expedia.com (travel service), TicketMaster (ticketbroker), HSN (home shopping network), Match.com (dating service), LendingTree (personal finance) and Ask Jeeves (web search portal). To many people, InterActive seems poised for leadership in the coming "Age of the Internet." Unfortunately, not everyone feels that way.

In late 2004 and early 2005, many of InterActive's largest investors were dissatisfied with its overall strategy, execution and performance. No wonder: its stock price had fallen from $42 a share in November 2003 to $20 a share one year later. During that time, InterActive maintained a large hoard of cash: $3 billion. It seemed to many that Chairman Diller should either put that money to work by using it to buy back stock, or make acquisitions, or by distributing it to shareholders in the form of dividends. Letting such a large horde of cash sit in the bank, earning minimal interest, just didn't seem like an effective use of capital. For a long time, though, InterActive's Chairman Barry Diller refused to change course, even though he'd been urged to do so by many of InterActive's largest institutional shareholders.

Newspaper accounts reported that one of InterActive's largest shareholders, William Miller (who owned a 15% stake through the Vanguard Mutual Fund he manages), was especially frustrated. Despite direct meetings with Barry Diller to press his point, he just couldn't get Diller to budge. Miller felt the company had lost its direction, but was frustrated in his attempts to motivate the company's management to face the problem, and achieve a renewed focus.

In one published report, Miller discussed his frustration, and with unusual frankness shared an insight into the tactics he was planning to employ. He shared the fact that he once spoke with Warren Buffett, the legendary value investor dubbed the "Oracle of Omaha," the chief executive of Berkshire Hathaway, and perhaps the most successful investor of all time. Miller said that Buffett had told him that the key to getting a Board of Directors to force its management to change strategy is simple: "Just threaten the Board Members' reputations... that's what they care about most." Seems like an unusual business strategy... or is it? Might the one and only Warren Buffett be someone who threatens people to get what he wants? Probably not. Probably doesn't have to. But Buffett is known to be an astute observer of human nature, and especially human nature in the business world's context. Maybe "the Oracle" is on to something; something important. We think so.

LESSON TO LEARN: Like Warren Buffett, for a long time we've thought a lot about motivation in the business context, because "motivation" is really what "negotiation" is all about. As we've observed many times, "Negotiation is simply a matter of motivating people to do something they are not presently inclined to do." There are different ways to negotiate, and different contexts call for different negotiating methods. But regardless of the subject, or the context, negotiation is always a matter of motivation, pure and simple.

In turn, the key to motivation is "leverage," something that will "move" your negotiating counterpart. Leverage takes many different forms, too, but in workplace negotiating, there are three basic forms of negotiating leverage. Each is a driver of your boss's perception of his or her own self-interests. Boiled down to essentials, there are only three "interests" in business - three things that "make the business world go 'round": Revenue, Relations and Reputation.

When you negotiate for yourself at work, you must focus on your boss's perception of how you'll affect these "three interests of business." These are the three - and the only three - determinants of the decisions you seek: to be hired, or promoted, or given a raise, or perhaps a better bonus. These are the three decisive factors of every decision made for you, and about you.

1. Revenue. "Money makes the world go 'round." We mean "revenue" in the very broadest sense of the word: any increase in money coming in, or any decrease in costs going out. "Revenue" is the first, most direct of the "Three Interests of Business." If you have convinced your boss, or your prospective boss, that you can increase her revenues, or decrease her costs, then you have done the first, and most direct, thing you can do to get what you are negotiating for, whether it's a new job, a promotion, a raise, a better bonus, or anything else. "Revenue" is the first of the "Three Interests of Business," and thus "Decisive Factor Number One."

Think about it: what is your boss (or prospective boss) thinking about when considering giving you a job, a promotion, a raise, or anything else you seek? His thought is, "Is this person the best one to handle the position?" Every position is either a money-maker, or a source of support for another money-maker in one way or another. But the overall objective is, "Will this person help us make money?" Being a person who does bring in a lot of revenue, by whatever means, gives you great leverage, and even greater job security.

"Revenue" is the first, most direct and most short-term consideration of any business. And it's the first of the "Three Interests of Business"that your boss will assess when he's considering hiring, promoting, giving you a raise, or anything else. It's the first determinant of your success in workplace negotiating, but it's not the most important...

2. Relations: "You're nobody 'til somebody loves you." In business, "relations" are a longer-term interest than revenues are, but "relations" are undoubtedly a more important interest. By "relations," we mean all important human and business relations - including those with customers, suppliers, other employees, investors, even Board Members. It is through our important "relations" that we actually achieve our "revenues." Lose your most important "relations," and you can kiss your "revenues" good-bye. If you've convinced your boss, or your prospective boss, that you can enhance her important business "relations" - either bring in new ones, or make existing ones stronger and more productive - then you've done the second thing you can do to successfully negotiate at work. You'll get what you want, whether it's a new job, a promotion, a raise, a better bonus, or anything else.

Consider your boss's point of view: Will you attract new, important, valuable clients? Or, will you disrupt the good relations that have developed with suppliers? Will you work well with colleagues? Or will you sow discord among them?. "Relations" are the second of the "Three Interests of Business," and thus "Decisive Factor Number Two."

3. Reputation: "It takes a lifetime to build a reputation, but just a moment to lose it." So goes an old Yiddish saying. Of the "Three Interests of Business," Reputation is the most important, by far. Why? It's simple: Lose your Reputation, and you'll soon lose your Relations, and in turn, you're sure to lose your Revenues. It's for this reason that savvy business leaders hire public "relations" experts to build, polish, enhance, and protect their own reputations. It's for this reason that savvy business leaders are so sensitive to the merest hint of scandal, suggestion of impropriety, or perception of weakness. And it's for this very reason that, first and foremost, bosses are concerned about whether it will help, hurt or otherwise affect their reputations if they hire you, promote you, give you a raise, or make any other decision affecting you Their first question is, and always will be, "How does this affect me?"

Imagine for a moment, a restaurant owner deciding whether to hire, or promote, a waiter. First concern: Revenue. Translation: Can this waiter handle six tables at once? How about 12? Perhaps even 18? Can he convince patrons to buy expensive wine with their meals? It's a question of how much revenue can he bring in. Second, and more important, concern: Relations. Translation: Will this waiter make customers happy? Will they find him sullen, uncommunicative, even forgetful? Or, is he jovial, a master at memory, and a star attraction? If he knows a lot about the food, and choices of wine, customers will like that. On the other hand, will this waiter make all of the kitchen help quit? Third concern: reputation. If this waiter makes people rave about the service, that will enhance the restaurant's reputation, and more and more diners will come. On the other hand, if he spreads some kind of disease, well, there goes the entire business, in one fell swoop. It's all a matter of revenue, relations, and reputation.

Create a "Perception of Value" by making your boss understand that you are (or you will be) a net positive - hopefully a very large net positive - to their "Three Interests of Business." Everyone is "in business" these days... your employer, your boss, and you.

So... that's what Warren Buffett was talking about when he said, "Threaten their reputations... that's what they care about most." Buffett is aware of the Three Interests of Business, and keenly intuitive about which one is most important. Find ways to address your boss's "Perception of Your Value" by considering her perception of her own "Three Interests of Business" - by focusing on her revenue, relations and reputation - and you'll have gone a far, far way toward successfully negotiating for yourself at work.

WHAT YOU CAN DO:

Every now and then, imagine yourself to be your own boss, or if interviewing, your prospective boss. Imagine yourself sitting in his or her chair, at his or her desk, and try to understand his or her concerns, fears, and goals. Imagine how you might be able to assist your boss in achieving those goals. Most importantly, in doing so, consider how you might enhance her perception of her own revenues, relations, and reputation:

•Regarding revenue, can you bring in new customers, make current customers bigger customers, or perhaps more profitable customers, for your firm? •Regarding revenues, are you aware of potential cost-cutting techniques that might work well for your division? •Regarding relations, have you recently met someone whose affiliation with your firm might improve its public image? How could you make that "affiliation" happen, and then become known to others? •Regarding relations, do you know of a good way to improve morale among employees, perhaps motivate them, or even show appreciation where it is due? •Regarding reputation, what achievement, distinction or honor has your department recently attained that might make your boss shine in the eyes of the Board, if they were aware of it? How might they be made aware of it? •Regarding reputation, is it possible to get an article written and published about the good charitable deeds your company has done at Holiday time?

Your ability to indicate to your boss that you think along these lines, that you can enhance these interests, will go so very, very far to give you the kind of leverage that simply works wonders in workplace negotiating. Your ability to do so will be greatest if you remember to focus on revenue, relations, and most importantly reputation. Just ask Warren Buffett.