General (Debt Collection): Psychological profiling provides the edge when negotiating $4 million settlement Written by Kaizen Enterprises Pty Ltd
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Case Studies

 

Client: Software distributor (ASX Listed)

Project: To collect at least $1 million owed by a large multinational technology services vendor

Service: General / Debt Collection

Key achievements:

  • Forensic reconstruction of comprehensive documentation supporting the disputed claim
  • Construction of psychological profiles for the key executives from the debtor company
  • Development of a strategy to create a successful outcome
  • Final settlement for $4 million, plus termination of pre-existing exclusive supply agreement

Synopsis:

Kaizen Enterprises was engaged by a prominent national software manufacturing company to collect around $1 million owed by a large multinational technology services vendor. This debt was almost wholly in dispute and the relationship between the parties had turned acrid. To make matters worse, our client had signed an exclusive supply agreement with the debtor company which made simply walking away from their worsening relationship impossible.

To help determine the strength of our client’s claim, we interviewed all personnel at the client company who were involved in the matter and created comprehensive documentation to support the claim.

Because we were going to be negotiating in a situation of considerable uncertainty, we decided to develop a character profile to guide our overall strategy. We engaged a psychologist who had specialised in astrology to create character profiles for the four executives with whom negotiations would have to take place. The choice of astrology was critical, as the psychologist could not observe the executives in person and needed a baseline from which to develop the profiles.

As we had the date and place of birth for each of the executives, but not the specific time, we obtained charts that did not require the time of birth. Using these charts our psychologist developed a profile that focused on 15 key characteristics of each individual.

To verify the accuracy of the profiles, we located several third parties who had known the executives for many years. Without revealing the source of the information, we asked each person to agree or disagree with the characteristics highlighted by the psychologist. Amazingly, 59 of the 60 characteristics were agreed as accurate, according to their knowledge.

Based on this confirmation of our character profile, we felt that we now had sufficient information to make effective decisions about the likely behaviour of the executives.

Comprehensive multimedia searches revealed that the debtor company was undergoing a due diligence assessment process. We determined that if a court action against the debtor were to be launched by our client, it would put more than $20 million of bonus compensation at risk for the executives involved in the negotiations.

The debtor company was financially sound, meaning that if an agreement could be agreed there would be no capacity-to-pay issues. However, the ongoing dispute ruled out most standard negotiating tactics. It also made the search for an alternative distributor critical: by the time we had reached the point of opening negotiations with the debtor, we had helped our client to reach agreement with an alternate distribution company to enter into a distribution relationship should the talks result in a way for this to legally occur.

We knew that negotiating would be highly difficult. Using the information gathered about our client’s case, the psychologist’s assessment of the debtor executives’ likely responses, and the information about the pending bonuses, we devised a strategy for our client’s CEO to pursue during negotiations. The character profiles we had commissioned suggested that the negotiating executives would be highly sensitive to the possibility of negative press coverage should the matter end up in court. Therefore, we advised the CEO that if all else failed, he should put on a display of raw emotion – essentially, he should become a loose cannon and threaten to drag the matter through extensive, and very public, litigation. We expected that this would trigger fears in the executives that their entire bonuses would be lost.

This strategy proved successful during the subsequent negotiations. After the usual exchange of pleasantries, the debtor company’s executives opened with a take-it-or-leave it offer of $538,000. Eight hours of negotiations led nowhere. At this point, as our representative was leaving the room, our client’s CEO staged his pre-arranged apoplectic fit: he went red in the face, hyper-ventilated and started shouting across the table. This sudden outburst was so effectively staged that even our own representative considered calling an ambulance. The CEO’s first words after storming out were: “How’d I do?”

Our assessment of the debtor company’s executives proved correct. Less than 72 hours later, after the executives had considered the full ramifications of non-settlement, they made an offer comprising cash and stock worth over $4 million. A Deed of Settlement was signed the same day.

The original claim had been for around $1 million, and the optimum outcome considered by our client’s CEO had been $1.75 million.  The debtor company also agreed to immediately terminate its exclusive supply agreement, enabling our client to engage the new distributor.

The strategy employed for the successful resolution of this claim reflects the range of skills that are available to clients who engage Kaizen Enterprises:

  • Strategic thinking;
  • Thorough research;
  • Forensic reconstruction and evaluation of evidence;
  • Risk assessment;
  • Character profiling;  and
  • Coaching key negotiators to engineer a successful outcome.