Stuck in negotiations? Try Hootsuite's steak dinner clause | Hacker News Reader

Stuck in negotiations? Try Hootsuite's steak dinner clause

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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.

I can confirm that. A deal like this would get me fired immediately as an ethics violation (I work in financial services). Instead of the dinner, they probably could've negotiated a lower fee which in turn would be beneficial for both clients and the company.

Instead of the dinner, they probably could've negotiated a lower fee which in turn would be beneficial for both clients and the company.

TFA said they were at an impasse on the fee issue. This is just one way of breaking the deadlock. If anybody is worried about ethics issues just change it so that the dinner is Dutch. The point is about A. moving forward, and B. having those meetings - not the couple of hundred dollars spent on the meal itself.

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.

$450 is not a de minimus expense on $100k revenue. Keep in mind that they are negotiating the 2 percent credit card fee. $450 is a significant fraction of that $2,000.

It is less than half a percent of the $100k and quite honestly an expense the vendor would likely spend anyway on business development to maintain this relationship anyway. Hootsuite feels like they're getting something, the vendor is agreeing to something they'd probably pick up the tab for anyway, and both sides feel like they gained something.

The credit card fees really don't enter the frame for me. Hootsuite blinked and conceded that term.

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.

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.

Make the dinner for any representative of the company, not a named individual. Thus the company receives the benefit, not an individual, so there is no corruption.

Asking for a $450 steak dinner from a vendor (backbone ISP Network operations, we buy $180,000 routers) would get you fired by those who decide on the next generstion cire routers and dwdm platform, on the spot.

And this is why established companies with unimaginative salary men who can only read the paperwork fail and nimble smaller companies can over take them even if the established companies have the market share.

Guess it's like catch up in computer games.

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."

And the vendor is the one who benefits more from the steak dinner. Most vendors love taking out clients to expensive meals. It grows the business as a result.

I'm a big fan of creative outs in negotiations (figure out what you value and the other party doesn't value and ask for it as a concession, or change the deal to create more value) but this was more like "in return for giving a concession to the vendor, we are giving another one."

> 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.

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.

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"

If credit card fees are $2,000 for every $100,000 of revenue (assuming 2% and all revenue through CCs), how is that different than 450$ for every $100,000 of revenue. This was not a 1 time dinner, it was "up to 0.45% of revenue will be spent on steak dinners"

In the end it's still a concession, 0.45% is less than 2%, and a vendor might spend that much for schmoozing and maintaining business relationships anyway, but I would say its the same kind of cost as credit card fees.

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.

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.

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.

> Steak dinner is a benefit to an individual

I wouldn't be so harsh, so quickly. "Company will eat certain fees if davidu gets free steak," would be a problem. But "Company will eat said fees if employees of Company, nominated by Company, get steak dinners" passes muster. It's not uncommon for travel expenses to be covered in contracts. With periodic sign-off from an officer not party to the dinners, I could see it flying at even the most conservative of companies.

> should be treated separately and unrelated to contract negotiations and deal terms

A contract is a memorialisation of a relationship between two parties. Creative drafting often involves bringing in factors one hadn't considered to mediate a disagreement.

Note though that the contract stipulates that two employees will go, not which two. It therefore is a benefit for the company, provided the company chooses the best people to go to nurture the relationship.

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.

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.

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?

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 :)

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.

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.

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!

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.

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.

Why would you be fired?

This isn't illegal. It's any two employees so it doesn't benefit an individual. And it doesn't seem to involve government contracts. What so wrong with this?

Sheesh, given that I've seen contracts signed because someone brought expensive alcohol, strippers, etc., this seems perfectly reasonable.

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.

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.

Did you just make this up, because it seems brilliant? This is just the sort of thing that would get in the head of those "I'm the dealmaker" types...

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)

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

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.

Don't try this with a government contract.

Within the bounds of legality, of course.

Many government arrangements that work exactly like this.

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

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

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

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.

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

This is clearly against the guidelines at my company.

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?

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.

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

It's not bribery if it's in the contract.

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.

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.

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

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.

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.

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

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.

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