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When You Should (and Shouldn’t) Use an Ultimatum in Negotiation
The art of getting a room full of big egos to think they each got a fair deal
When I launched Paychex in 1971, I had no intention of providing payroll processing services outside of my hometown of Rochester. But when Phil Wehrheim, a former colleague of mine, asked to partner with me, we struck a 50–50 partnership deal (without lawyers), and he opened offices servicing Buffalo, Syracuse, and Albany. Then Chuck Wollmer, the employee of a client, came to me wanting to open a franchise. That was how Paychex started to grow from a small local business into a national organization: one territory at a time.
By 1979, there were 17 of us, both partners and franchisees, across the country. Finding a good deal for everyone has always been my guiding principle for negotiation, so I had ensured that every partner and franchisee was happy with the partnership or franchising deal we had made. But we had reached the point where it was time to take Paychex from being a bunch of partners and franchisees and turn it into a corporation.
The 16 partners and franchisees, plus me, all met in Nassau to discuss consolidating into a single company. It posed a significant challenge: If I wanted them all to agree on consolidation, each and every one of them had to believe they were getting a fair deal. The big question was, how would I decide who got what percentage of the new company?
There was simply no way to negotiate a deal with 16 partners and franchisees with big egos who possessed a skewed view of their actual worth. It would have been a moving target; as soon as I made a deal with one person, I knew details would get back to someone whom I’d already reached a deal with and then that person would want to renegotiate. My only chance was to create an acceptable no-negotiation situation.
“Never negotiate with an ultimatum,” is a rule I agree with in principle. If you are trying to buy a car and you tell the salesperson that you are only willing to pay a certain amount or you will walk, you better be prepared to walk. Most of the time, however, you may be closer to a deal than you think. If you are both willing to give a little, a good deal could be achieved by both parties.
