Post No.: 0649
I enjoy the subject of negotiations because of the social psychology aspect. They can play out like psychological chess. That’s why I like sharing with you what I’ve learnt…
In international contexts, take note of the different cultural sensitivities and traditions of the other party. In general, even if you are a big global company – behave like you are local to them. Listen to them, stay close to them, and be aware that what’s important to them may not be as important to you, and vice versa.
Be aware of any cultural differences such as gestures and their meanings in different countries, to avoid any potential faux pas like unintentional slurs! Without understanding their culture, it may result in miscommunication – whether verbally, non-verbally or regarding the sequence of expected events during a negotiation (e.g. getting straight to the point versus taking the time to build a relationship first).
Read up on the country’s history and traditions, and most importantly their current political and social situation. Learn a bit of the local language if necessary. Be open, willing to learn, show humility and that you’re making an effort. Bring the best of both your cultures together (so don’t completely abandon your own).
Ask lots of clarifying questions and ask them early – don’t assume that you are on the same page on an issue just to find out down the line that you’ve misunderstood each other!
Norms (unwritten/tacit) and standards (legal/regulatory) are what people in a given country or culture tend to respect or agree upon. If a law is very well known then it becomes a norm too (the normative power of rules). Some norms may not be completely clear or uniformly accepted yet are nevertheless authoritative. Norms and standards in negotiation contexts must be meaningfully authoritative i.e. are strong enough to carry weight in persuasive argument. For example, fairness is understood to be a norm. However, that doesn’t mean that one’s own conception of ‘fairness’ is a norm (e.g. it’s like how one may believe that distributive justice is right in order to tackle unfair inequities, or wrong because it’s unfair to take from the hard-working). One therefore needs to try to use externally verifiable and well-understood norms and standards to make persuasive arguments.
When people across cultures reach an impasse, each can often blame the other for not understanding ‘how things are done here’ or can stereotype ‘there’s no understanding those types of people’. (In any culture, because of bias, if a failed deal would create a disaster, like a partial government shutdown, both sides will blame the other for not agreeing to what their own side wants i.e. ‘it’ll be your fault if a deal falls through because you won’t agree to my terms’!) One strategy to break the deadlock may be to rely on mediation or to try to strip emotion away from the issue by bringing it back to the pure interests (e.g. they have interests that only you can meet, and vice-versa, so let’s make this happen).
Interpreters can possibly add another layer of misinterpretation but are necessary if there’s a language barrier. If the stakes are high then both parties will normally have an interpreter each so that they can both check on each other’s interpretations. Sometimes there’s a prior assumption that language won’t be a barrier but then when the parties get together they may find that interpreters are necessary after all. Under law, you must be careful with confidentiality though if you’re bringing someone temporarily in to make translations.
If you’re using the services of a lawyer to help you negotiate a deal with another party then you must ensure that they’ll be representing your best interests. For example, if there are choices that involve a combination of advances and royalties, and you are interested in taking a slice of those royalties, then if your lawyer is only going to get a commission from the advances and nothing from any royalties – you won’t be sure if they’re pushing for an advance-heavy deal because they think it’s in your best interests or only their own? Therefore make sure your lawyer is incentivised to push for greater royalties too i.e. they should receive a small cut of those royalties too if they materialise. Ensure that everyone has some ‘skin in the game’ – some risk linked to some potential reward. Even if the contract you have with your own lawyer isn’t amended, you’ll still want to get in the open any issues about conflicts of interest so that they won’t surprise anyone if they arise during a negotiation.
Although experienced negotiators will understand that most of the action will occur as the ultimate deadline looms (e.g. like Brexit!), some people will feel stressed and angry by this point and therefore not in the mood for expanding the pie. This is why, from the very start, you should not upset or irritate people, lie or show a lack of integrity, and why you should be amicable in style instead. Woof!
You’ll have the best chance of getting a lowball offer accepted if you’re congenial and the other party likes you. You’ll have the best chance of receiving concessions in general if you’re empathic with them (e.g. in a property sale, don’t diss the kennel the seller raised their pups in even though you’re trying to make it sound not so special in order to lower its perceived value – appreciate their home but point out its flaws in a light-hearted and non-judgemental way) and if you seek their empathy (e.g. you’ve just gotten married and this will be your first kennel, and you want to raise a lovely brood like theirs in it so can they please help you out a little?) Listen more than talk – get them to invest in the process. If they like your demeanour and you make them feel good then they’re more likely going to want to cooperate with you to expand the fluffy pie and offer concessions. Post No.: 0582 studied concession patterns.
Once something has been agreed upon – immediately get it off the table. Too often, something important gets sorted out but then someone wants to go back to it to renegotiate it, thus the deal never gets done. Get the big points sorted out first.
You could broadly break negotiations up into three meetings or stages – the first is to get to know them and for them to get to know you; the second is to outline the strategy and to get the big points or at least the big principles down in a term schedule or similar; and the third is to finalise the details and close the deal.
You can modify the terms but not the big principles of the deal – so get the big principles solidified once they’re agreed. An example of a principle might be that they don’t want you to lay off all of the staff once the company is sold to you and you will do that for them; and a term might be that you will pay them €5M for their company. Those principles are 80% of the task, and so if you follow the rough ‘80/20 rule’, the rest can take as long as it needs.
Yet do seek to get the deal done and dusted as soon as possible at this point. Lawyers are often paid by the hour so it’s not in their interests to go quickly when it’s in your interests that they do. Hence once the principles are agreed (the second stage) – try to secure an exclusive deal (to stop yourself getting gazumped by a third party as a buyer or gazundered as a seller), get it done in a reasonable timeframe, and keep close to them to avoid things entering that might scupper the deal (such as a family matter on their side).
Then once the contract has been drafted (the third stage) – go through each page one-by-one with everyone around the table, and whenever a page has been agreed upon, turn it upside-down and put it to one side with the understanding that no one can go back to it, or if it’s still in dispute then put it to another side and return to that pile only once all of the pages have been run through once.
Make it difficult to reopen agreed-upon items (e.g. by signing off on those individual pages) so that you can keep the deal moving towards completion. Hopefully the unresolved pile will only include relatively small points that you are able to freely concede if need be because the main points are safely secured. The details in contracts are important but don’t get hung up on the small things, even though your lawyers might – concede them, and the other side will likely reciprocate this gesture with other items in return. However, if the other party claims that you shouldn’t be quibbling ‘over a small amount’ then throw it back to them by saying, in a cheeky and friendly manner, that if it’s so small to them then they shouldn’t mind conceding it to you(!)
Have the (non-alcoholic) champagne on ice quite visibly nearby during that third meeting or stage to show that the deal is about to get closed. And always be magnanimous – congratulate them and tell them what a grrreat deal they’ve just secured! This will make them feel like they have squeezed the very best deal they could from you and they couldn’t have gotten anything more. They should feel happy and have no doubts or regrets.
Post-settlement settlements are possible though even after you reach an agreement, especially if you can show that it’ll improve the positions of all of the parties involved (basically if you can show that the pie can be enlarged even more). So you could try to discuss with the other party whether there are any ways that you and they could improve upon the deal? Ask how you could’ve handled the negotiation differently? The worst-case scenario from this point is that you’ll all just fall back onto the original agreement.
Mediation (where an independent third party facilitates an agreement that’s made between two parties on their own) and arbitration (where an independent third party imposes a binding agreement upon the disputing parties) can suit different purposes – arbitration is often used to apply justice to punish and correct past misdeeds (it looks backwards), whilst mediation is used to look for ways to reach an agreement that allows the parties to work together going forwards (it looks forwards). So arbitration may look at the past facts of the case and apply justice but destroy relationships going forwards, whilst mediation is usually the route to go down if building or restoring the future relationship and cooperation opportunities matter much more than what happened in the past. Moreover, in general, if two parties can reach an agreement on their own through mediation then the outcome is better for the both of them because they cannot accuse a third party of applying bias and no side will lord it over the other for ‘winning’ the decision from a third party.
Note that if there are various company shareholders to consider then no shareholder can legally receive more favourable deals per share than any other shareholder, including in-kind benefits. One share must be equal in value as another equivalent share in remuneration. It’s possible to give different shareholders different things though as long as the total value that each shareholder receives is proportional to their shareholding (e.g. two people hold 50 shares each but one will accept €10k in cash and the other will accept €5k in cash along with a lease that they accept is worth €5k).
Woof. So there are solutions if things go awry. Arbitration is available, but mediation is preferable because, apart from learning from the lessons, we should try to look forwards rather than backwards.