The Art of the Middleman

From brokers and lawyers to head-hunters, agents and consultants, and the modern economy is awash with “middlemen”. It’s a word that is often used derisively, but in a market largely defined by its almost endless choice and unlimited demand, the ability to facilitate the relationship between supplier and customer remains a vital function within almost all sectors.
To be an intermediary and mediator, to facilitate and enable transactions, clearly requires a unique and crucial skillset. But how are these skills best applied? What separates individuals who struggle as a central link in the business chain to those who flourish?

Quality not quantity.

To put it simply, A middleman’s value is derived from the value of the relationship they can generate between the supplier and end-user, and the volume of these relationships they can cultivate. The most successful third-party relationships however are built upon trust. Whilst a reputation for supplying a trusted service at a high volume can be useful, the long-term viability of providing a high-quality boutique service for returning customers is self-evident, as there is room for a more comprehensive relationship between facilitators, end-users and suppliers to develop.
There is often a tendency in business to reach for a large quantity of deals made and relationships brokered to drive profits. However, this can repeatedly come at the expense of cultivating a relationship which will yield loyalty and repeat business. The best business-to-business partnerships should be more than just transactional.

The “intangibles” that underpin continuous relationships.

There’s a reason retained executive search companies, and not contingency firms, are considered the gold standard of recruitment. Any intermediary actor is largely valued on their expertise and ability to address an end-user’s business needs. But these needs are usually complex, not immediately obvious and often not entirely known to the client themselves, especially in high-stake transactions. Individuals who can retain the services of their client over a long period are only able to do so because of this greater appreciation of the depth of their client’s needs. This involves appreciating the intangible variables that may affect the circumstances of a business partnership. Too often when brokering a deal or relationship, we tend to focus solely on fundamentals such price, margin and contract length, with little consideration for other needs that are not as fundamental but also of interest to the client. The skill here is not only to be in possession of excellent market knowledge so that you can identify trends and contingencies that should be considered, but also a measure of strategic and emotional intelligence.

Keeping an ear on both sides of the table.

Facilitating a relationship in this sense requires a considerable measure of neutrality. Being a middleman invariably involves bringing two parties together for the purposes of negotiation, but it is not enough to merely perform the function of a bridge between two parties. The middleman that survives is the one who has something to offer well beyond the making of introductions. Crucially, professionals must consider their suppliers and resource-holders as clients just as much as the end-user. The aim of an intermediary party should not only be to facilitate discussions between the two camps but also to effectually manage them. the needs of the supplier should not be overly side-lined to suit the preferences of the end-user, so the aim of the intermediary should always be to “tease out” an arrangement or outcome that suits both sides.

Could outsourcers benefit from mediation?

It hasn’t been the most successful couple of weeks for Outsourcers.

At one point last week, Interserve’s share price had dropped to 29p, the lowest in over 30 years. Interserve have also been forced by investors to pull out of the consortium heading the expansion of Durham University, as well as being fined for numerous safety blunders at an animal testing site in Weybridge. Allied healthcare has also run into trouble recently, being forced to sell off its remaining contracts to other providers in order to stay afloat. Meanwhile, Capita have come under increasing scrutiny following a critical mishandling of cervical screening tests.

At this point, so fast on the heels of Carillion’s collapse, trust between the outsourcing industry and their clients are at perhaps their lowest ever point.

So how can this trust be won back?

It could be argued that the breakdown in the relationship between outsourcers and the public sector can in large part be put down to both parties negotiating without possessing a comprehensive understanding of each other’s motives and needs, thus leading to contractual and financial difficulties which disrupted the relationship.

Take the case of Carillion. From the government’s perspective, Carillion represented a stable support services partner with a successful track record. PFI contracts were awarded to them on the understanding that they were a financially viable, low-risk partner that could be relied upon to deliver a high-quality service. For Carillion, outsourcing and public sector contracts represented a vital revenue stream and an opportunity to keep their teams and subcontractors busy.

But crucially, these deals were negotiated with little regard for the viability of the long-term business relationships underpinning them. When awarding contracts to bidders, government departments would often prioritise cost over the quality of service and accept bids well below the cost of the service provision itself. For their part, firms such as Carillion and Interserve have spent millions renegotiating on deals where they only maintained either very small or negative margins.
Whilst we could diagnose the problem as one of poor negotiation, could the practice of negotiation itself be at the heart of dysfunctional business relationships?

Negotiation, when performed solely as a settlement or dispute resolution between two parties, can easily result in a zero-sum game, where one party’s needs are often side-lined in favour of the others. In any binary negotiation, the process of starting from an entrenched position and gradually meeting in the middle invariably results with one party gaining the upper hand over the other in the final terms of the settlement. Not only does this strain the trust in the relationship, but the constant need for expensive renegotiations and resettlements as problems arise render it inefficient and unproductive.

When such large contracts, often tied to substantial financial risk, must be enacted, the bidding process could benefit greatly from a mediating neutral third party.

Recently, MyFM enacted the role of facilitator in discussions which had to resolve very similar conflicts to those that have plagued outsourcers, a bidding party seeking to protect their margins and an end-user that prioritised cost. As a neutral broker, the mediating party has knowledge of what each side’s primary needs and requirements are, you have a greater understanding of which cards each side are playing close to their chest and what they will be willing and unwilling to compromise on. Through unique market knowledge, you often understand your client’s desires better than they do.

In this case, mediation allowed us to address the concerns of both sides of the table and find a solution that synthesised the needs of each party without either one compromising on their core requirements from the deal.

Instead of pursuing a price that would eat into the service provider’s margin, we encouraged a settlement in which the end user paid an acceptable price for the service, whilst also encouraging an agreement on price by encouraging more appropriate methods of reducing costs, such as providing a more efficient service.

If it is true that conflict largely arises from misunderstanding, then using mediators, with their clear grasp of respective priorities and ability to identify actions that resolve conflict, presents a scalable, elegant solution to all high-stakes negotiators.

Keeping Your Network Small

I was chatting to a colleague this week about why he keeps so few permanent connections on LinkedIn. He said that he only really needs around 150 people in his network to make optimal use of the platform. A network that is too large and unwieldy is a hindrance, not a help.

If we’re honest, keeping in touch with your business network can be a chore even at the best of times, and for FM professionals the task is particularly daunting. How can you effectively keep up with all those opportunities, referrals, hot leads and dead ends over the course of seemingly innumerable phone calls, texts, emails, liquid lunches and coffee breaks?

Platforms like LinkedIn are sold to us on the basis that they make this complex web of communications easier to navigate, but we often use these tools inappropriately. LinkedIn’s “social media” landscape can encourage you to approach it like a workplace version of Facebook, constantly making new connections with the aim of making your following as expansive as possible. The issue with this approach is that is often leaves you feeling overwhelmed by the plethora of activity your network does on LinkedIn. Your feed can very easily become a constant stream of mostly irrelevant information that makes keeping in touch with leads and actionable business relationships a bit of a “needle in a haystack” mission.

In an industry such as ours, largely dependant on close, one-to-one transactions and relationships, there is relatively little to be gained by oversaturating the forums we use to engage clients and customers, we should instead aim to keep our networks, small, manageable, actionable, and fluid.

The anthropologist Robin Dunbar’s theory that nobody can maintain stable relationships with more than 150 people hold particular weight in the facilities management world. We tend to work with people we trust, have worked with before or can usefully engage with whilst side-lining everyone else. Rather than trying to fight this fact, we should embrace it, and acknowledge that it can help us to strengthen and focus on the relationships that really matter.