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November 05, 2004

Harvard Negotiating 102, "Getting Past Yes"

Negotiating is an art that many engage in but at which few people excel. In the context of alliances, negotiations play an essential role, if not the essential role, of any deal. Negotiations create alliances and residual effects of negotiations destroy alliances. The problem is that the negotiators themselves often lead to the demise of the alliance in the long run, even if they are successful in the short term.

According to an article in the November issue of the Harvard Business Review entitled, “Getting Past Yes,” by Danny Ertel, deal makers often negotiate with the wrong goal in mind, getting the contract signed, as opposed to solidifying terms that will benefit the parties in the long run. In fact, companies often compensate based on the size of the deal that gets signed, and the well known negotiations books teach that “closing” is the final destination. Ertel argues that the techniques that are used in this approach have a direct relation to the ultimate failure of the deal, after the closing..

The negotiators whose goal is to get the contract signed behave differently in negotiations than those who see the agreement as the beginning of a long relationship, the goal of which is to create value. Ertel believes that these contrasting approaches have different opinions on such matters as the use of surprise and the sharing of information. These two camps “also differ in how much attention they pay to whether the parties’ commitments are realistic, whether their stakeholders are sufficiently aligned, and whether those who must implement the deal can establish a suitable working relationship with one another.”

In addition to these underlying problems, companies often bring in “hired guns” to ensure the deal is closed with the fewest concessions. The people who are then placed to implement the new terms of the alliance have no contact with the “hired guns” and don’t know why such structure exists. Finally, these “hired guns” can create animosity between the parties as efficiently as they can close the deal, and this feeling lasts long after the contracts are signed.

The article then lists five methods that if adapted, could affect the success of alliances.

1. Start with the end in mind; look down the road a year into the deal and anticipate its success by looking at what terms need to be in place to accomplish stated objectives.

2. Help them prepare, too; when looking to be successful at implementation it is important to make sure the other side is as well prepared as you are during negotiations, as opposed to trying to gain an advantage through surprise.

3. Treat alignment as a shared responsibility; don’t rely on secrecy to achieve your goals, think about informing internal stakeholders of your interests and objectives so that they can provide you with suggestions to improve the outcome. Acceptance of the deal by the people who are necessary for its implementation is essential. While it is also necessary to withhold information from some people, “suitable proxies should be identified to ensure that their perspectives (and the roles they will play during implementation) are considered at the table.”

4. Send one message; the team that negotiated the terms of the contract need to inform all the people involved in its implementation the reasons why it is structured as it is so that this implementation team can start off on the same page.

5. Manage negotiation like a business process; consider the costs and challenges of executing the deal terms, rather than simply focusing on getting the other side to say yes.

This article is also good in that it illustrates the results of a number of companies that have used these different approaches to negotiations. Despite the hard work and potential additional costs of this style of negotiation the author leaves you with this thought; “the most expensive deal is the one that fails.”

Posted by Quentin Johnson at 10:48 AM in Alliances | Permalink

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