Julian Hutton: The story of the rooster in the hen house Featured

7:01pm EDT November 30, 2011
Julian K. Hutton, president, Merlin Hospitality Management Julian K. Hutton, president, Merlin Hospitality Management

In the souks of Egypt there is a saying, doubtless put about by the owners of carpet and antiquities stalls, that “a deal is only a good one when both sides come away happy.”

When negotiating an agreement with a Wall Street bank a couple of years ago, I floated this concept by them and they disagreed. Their attitude was that the proof of a good deal was when both sides came away unhappy. As the last few years have clearly demonstrated, Wall Street has been generous in distributing their misery as widely as possible.

But at least an Egyptian carpet salesman and a Wall Street banker can agree that the outcome of a deal is shared equally, whether it be a win-win or lose-lose. For some years, I have been peripherally involved with someone who only believes that in order for there to be a winner, the other side has to be loser. For him there is no such thing as a win/win. If the other side is happy with the agreement, it means he must have left something on the table, which his vanity won’t let him do.

Rather than viewing negotiations as an opportunity to make something work for everyone, he enters into it like a crazed rooster invading a new farmyard. Feathers flying, hackles raised, leaping up and down to impress the hens and trying to intimidate any other roosters.

Sometimes this works. If the other rooster is weak, or has no choice but to give up his hen harem because they won’t lay enough eggs, or knows that if he doesn’t give up he’ll be turned into coq au vin anyway, the “crazed rooster” approach can be successful. But more frequently, it merely starts any negotiations off in a hostile atmosphere that makes it all the harder to build the trust needed to complete the deal.

Most of my crazed-rooster acquaintance’s deals are never consummated. Of those that have come close, when terms and price have been agreed upon, a deep-seated insecurity comes over the rooster and he concludes that if the other side is willing to do the deal it means he didn’t squeeze enough out of them. He suspects they must despise him for giving in so easily. So before signing anything and getting it concluded, he goes back and says he wants to change the agreed terms before he’ll sign it.

Invariably it isn’t about the money, which is often negligible; it’s about getting one over on someone else. It’s about the rooster making himself feel bigger by making someone else look smaller.

And what of the rooster’s deals that do come to fruition? For a start, he almost always ends up paying far more than he needed to. A wise seller knows that a lot of hurdles need to be overcome to put a deal together, and someone who starts off with an overly aggressive attitude is going to drag the process out and generate a mountain of legal bills. Coming in and proclaiming what a big shot you are only makes the seller set the price accordingly. On those occasions the rooster has managed to get a deal done, when the seller has had no choice, the atmosphere has become so poisonous that breathing life back into the entity once it has been taken over is incredibly difficult, time consuming, and expensive.

Nobody begrudges a tough negotiator; most people with something worth buying have been tough negotiators themselves and realize that is the price of the sale. But though the crazed rooster gambit may occasionally work, many more deals would be done and much more money made if both sides came away happy.

Julian K. Hutton is president of Merlin Hospitality Management, where he oversees the company’s hotel management and distressed asset management operations, drawing on 20 years’ experience in the worldwide travel and hospitality industry. Reach him at jhutton@merlinhospitality.com