Management students must remember that trying to close a deal quickly may help them get a ‘yes’ from the other party but it can never inspire others to sincerely carry out those agreements where both the parties need to work together
Negotiation is the art of war. Right? Wrong. That is fighting. Negotiation is about out-winning and outsmarting your opponent. Right? Wrong. That is deceit. Negotiation is about talking fast. Right? Wrong. That is simply a lot of talk that no one understands. Negotiation is about knowing the weakness of your opponent. Right? Wrong. That is a sting operation. Negotiation is about creating a relationship. Right? Right.
Negotiation is connecting with another person, coming up with a solution, and resolving differences to satisfy the needs of both the parties. That is why making another person say yes to your request is not, and should not be, your goal. Signed contract is not an end in itself. In many cases like an outsourcing deal, mergers and strategic alliances, agreement between union and management, contract with a supplier etc, a signed contract is only the beginning. Everyday people negotiate all kinds of deals. [pullquote]Outsmarting or outmaneuvering your counterparts at the table could well be pointless if in order to benefit, you have to work together after the deal is signed[/pullquote]They are wholly and completely engrossed on getting the deal done by whatever means possible. And when they do so, they proclaim victory and celebrate. Ask yourself—should they rejoice? Recall the feeling of victory you had on a number of occasions when you could get a yes from the other party in a difficult situation. Recall the feeling of frustration you had when the other party refused to cooperate or withdrew his whole-hearted support to make the deal work. You know that you were the loser.
Roger Fisher and William L Ury in their best-selling non-fiction book ‘Getting to Yes: Negotiating Agreement Without Giving In’ stated that the success of an agreement should be judged by three criteria—it should produce a wise agreement if agreement is possible; it should be efficient; it should improve or at least not damage the relationship between the parties.
Deceptive behaviour, aggression, use of force and power, tactfully making someone not a party to negotiation who makes you feel uncomfortable by asking difficult questions, trying to close the deal as quickly as possible etc, may help you get a yes from the other party but it can never inspire others to sincerely and faithfully carry out those agreements where both the parties need to work together for the success of the deal. This kind of behavior never allows you to get the benefit of doubt from the other party when problems arise, or to speak good about you, or to do business with you again should circumstances warrant so.
If you do not establish an effective governance mechanism, if you do not put the tough issues on the table, if you do not pay attention to how you are going to work together, you will never be able to fructify strategic partnership. Outsmarting or outmaneuvering your counterparts at the table could well be pointless if in order to benefit, you have to work together after the deal is signed.
There is no point to negotiation victories that can not be implemented,” observed Danny Ertel and Mark Gordon in their book ‘The Point of the Deal: How to Negotiate When Yes is not Enough’. The pursuit of immediate gain with no focus on the long-term consequences is a recipe for disaster.
Recent economic collapse, collapse of giants like Enron, Worldcom, Satyam are good examples of this mindset. If you think that by getting signature on a piece of paper from the other party, money will keep flowing to you and you are sure to succeed—we hope you will not mind if people call you shortsighted. You don’t need great wisdom to realize that the most expensive deal is the one that fails. Why then do most negotiators remain focused on getting a deal?
The answer is clear. Usually we offer more incentives to the participants to reach an agreement than not to reach one. In practice, negotiator fee scales tend to reward agreements. Often negotiators are paid a percentage of the final settlement. Negotiators are paid substantially lower transaction fees for negotiations that do not result in a fruitful agreement. Cover pages of business magazine need heroes who have done deals worth billions of dollars.
The tendency to equate successful negotiations with producing agreements has several undesirable consequences. Idalene F Kesner and Debra L Shapiro, in their article ‘Did a ‘Failed’ Negotiation Really Fail’, have given some examples: First, it puts pressure on the negotiators to close deals as quick as possible, even in the face of less than optimal conditions.[pullquote]Negotiators are fixated on cracking the deal because of the incentives at play – there are more incentives to reach an agreement than not to reach one[/pullquote]
Throwing a surprise becomes a usual tactic under the assumption that the other party may commit to something they might not have committed otherwise. When producing no agreement is considered a failure, then even a bad deal is better than no deal.
Second, it discourages an in-depth review of critical issues. Negotiators have little incentive to raise difficult issues as these could become hindrances in reaching an amicable agreement. Often, such overlooked issues emerge after the deal is done, and create substantial difficulties for the companies. It is assumed that as long as the other party commits to my demands, my objective is achieved. If the other party is not able to deliver afterwards, it is their problem.
The final undesirable consequence of equating negotiation success with reaching an agreement is that it encourages misleading views of costs. Under the pressure to produce an agreement, negotiators may tend to prefer a short-term view of costs rather than a long-term view.
Think of those situations when you adopted above mentioned tactics to get a deal signed and found yourself in a mess. Here are some examples and if they sound familiar we sympathise with you!
During her doctoral studies, a candidate works as research assistant to a professor. After her doctorate, she gets an offer from a respected business school. In the interview she is asked about her salary expectations. Considering her stipend during her doctoral period and being excited about this dream job, she says with great nervousness, “Rs 50,000”. She gets the job.
Elated about her job, she puts in her best efforts and works long hours. Suddenly, one fine morning, she learns that many of her colleagues with similar background and qualifications, and, in some cases even lesser qualifications than her, were being remunerated somewhere around Rs 60,000. She feels hurt and is mad at herself. No one lied to her. Others asked for more. So, why feel bad, you may argue. However, if you think that you will continue to receive her support and commitment on the job, you are in for a big surprise.[pullquote]The tendency to equate successful negotiations with reaching an agreement has several undesirable consequences[/pullquote]
Assume an airline company decides to acquire another company (for the sake of convenience, let us call them Alpha and Beta) where the tax liability is not disclosed and thus becomes a fighting point later on. However the acquiring company does not pay the instalments on time and subsequently the acquired company does not transfer the assets. Bookings are cancelled by the passengers resulting into a loss of millions of rupees.
Don’t get us wrong! We are not saying that you have to be nice or make lots of concession to build a relationship. Neither are we saying that the other party will appreciate your effort to put on the table all the possible hurdles that may surface at the time of implementation of the deal. We are only saying that in the deals that require continued support of all the parties for its success, no one can win if not everyone wins. We are only saying that you may live and survive without others, but you may find it difficult, if not impossible, to grow and prosper without each other!
Adapted from Financial Express dated 16th October 2013
