keep time and emotion from killing a negotiation
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Time and emotion — these are the two things most often wasted during a negotiation. We simply spend too much time on items that don’t really matter, because we let our emotions override any semblance of logic. It is a natural human response to act negatively, reactively, and emotionally to any negotiation points that are counter to one’s pre-disposed positions. It is also poor negotiation practice. The mere fact of having a position lies at the root of why we get caught up in the drama of a negotiation, rather than focusing on the plotline or ending (i.e. goal) toward which we are striving. In business school, students are sometimes taught the difference between position-based versus interest-based negotiation. When you focus on the differences between your positions rather than the commonality of your interests, little progress can be made. There is nothing necessarily wrong with having a going-in negotiating position, and we can’t really avoid having pre-existing assumptions and desires. But when we don’t get what we want and frustration ensues, what can we do? The key is to understand five areas that can both help move a negotiation forward and in doing so usually advance us to where we want to be:TRANSCRIPT
by Anthony K. Tjan
Keep Time and Emotion from Killing a Negotiation
Time and emotion — these are the two things most often wasted during a negotiation. We
simply spend too much time on items that don’t really matter, because we let our emotions
override any semblance of logic.
It is a natural human response to act negatively, reactively, and emotionally to any negotiation
points that are counter to one’s pre-disposed positions. It is also poor negotiation practice.
The mere fact of having a position lies at the root of why we get caught up in the drama of a
negotiation, rather than focusing on the plotline or ending (i.e. goal) toward which we are
striving.
In business school, students are sometimes taught the difference between position-based
versus interest-based negotiation. When you focus on the differences between your positions
rather than the commonality of your interests, little progress can be made.
There is nothing necessarily wrong with having a going-in negotiating position, and we can’t
really avoid having pre-existing assumptions and desires. But when we don’t get what we
want and frustration ensues, what can we do?
The key is to understand five areas that can both help move a negotiation forward and in
doing so usually advance us to where we want to be:
1. Understand the common goal and common interest.
Make sure you fully digest and articulate any areas of common interest.
Is it simply to maximize value for the company or are there instances, for
example, where the greater common goal may be to get a deal done to sell a
business rather than optimize its value by waiting?
One of the best ways of making this happen is to simply to have both sides
articulate their goals and interests in writing and share them to ensure clarity and
alignment.
2. Understand the underlying and ancillary motivations of the other side.
Oftentimes there are conflating or conflicting interests at hand.
As much as possible, you need to understand the total “motivational picture” of
your counterparty. For example, at our firm we have been in negotiations where
we ultimately learned that what appeared to be irrational negotiating by the other
side was driven by how they were compensated for the deal.
Where possible, uncover if those negotiating for other side have any personal
remuneration at stake, and how that changes with different outcomes – it will
drive behaviour.
by Anthony K. Tjan
Keep Time and Emotion from Killing a Negotiation
3. Be transparent and explain the why of your points. I
It can be surprising how seldom people explain the why of a position for which
they are fighting.
Take even the previous example on personal deal compensation.
If something is going to impact you personally, it may be better for you to
disclose it — at least the other party will understand.
So often it is taken for granted that the other side fully appreciates why you are
asking for a term or condition when they actually have little clue.
Before you can do this, you also need to make sure you fully understand your
own why for each of your points!
4. Calculate the materiality of each point.
Much of the time sink of negotiations is unfortunately spent on elements that
don’t really matter — things that will not materialize, or if they do won’t have a
major impact.
Legal and tax counsel is always critical and highly valuable, but can sometimes
also be the tail that wags the dog. Once I was leading an important negotiation
where we debated at length with legal and tax experts over “edge scenarios” that
might negatively impact us. This went on for two days until I took a step back to
actually calculate what our largest dollar exposure could be. It turned out to be
less than the cost of preparing a structure to avoid it and likely less than the
professional and legal fees we had already accumulated thinking about it!
Do the math and calculate how material a point is — then determine if it is really
worth fighting for in the bigger picture.
by Anthony K. Tjan
Keep Time and Emotion from Killing a Negotiation
5. Look for points that have an asymmetry in value.
Once you understand the math of a negotiation, look where there may be
asymmetry. There are always points where there is a fundamental difference in how
each side perceives the value.
To be effective in negotiation you need to comprehend the balance of trade on every
key point. Basically, look where your currency is worth more.
Consider, for example, the purchase of a house. If the eventual price is the most
important currency for you, then see where there may be a different lever (a different
“currency”) to trade for your desired lower price. Sometimes a seller may care more
about the timing or certainty of a closing than the price.
Taking out a financial contingency, or letting the close happen on whatever time frame
the seller wants, may gain you disproportionate benefit in the price. Remember the
bigger context and have the empathy and rationality to think about it from the other
side.
Following the five rules above will eliminate a large amount of futile negotiation on things
that don’t matter, or things that matter much more for one side than the other.
The goal of any negotiation is to reach agreement, but unfortunately the journey there is
usually painful. We find ourselves “stuck” on terms or conditions we feel are must-haves,
and lose perspective as to why we want the things we think we want. It does not need to be
like that.
Focus on the two or three scenarios that really matter for each side and have reasonable
probability of being realized, as opposed to every edge scenario. In the end it probably won’t
be a contract that saves you. It will be the quality of your relationship, your rationality, and,
yes, your ability to do effective subsequent negotiation (definitive documents are rarely
definitive).
The reality is that you are more likely to get a fair deal — and even get the opportunity, from
time to time, to have your cake and eat it too — if you stay disciplined on the underlying
architecture and rationality of each negotiation point. Good luck, and happy negotiating.
Anthony K. Tjan
Anthony Tjan is CEO, Managing Partner and Founder of the venture capital firm Cue Ball,
(HBR Press, 2012).
Mercuri International is the world’s largest sales performance consultancy.
We have more than 50 years’ experience in helping companies implement strategies
and achieve powerful sales results.
Do you want to know more about what we do? Call Mat Everitt on 07572 343 341