The Endgame, Part IIPUTTING THE DEAL INTO PRACTICE
The toughest challenge in any negotiation is not closing the deal (the subject of my Winter 2012 column) but making the deal work. The annals of negotiation are littered with deals that somehow were never carried out. The world is still waiting for the permanent peace between Israel and the Palestinians promised by the 1993 Oslo Accords, for example. Closer to home, you may still be waiting for repayment of the thousand dollars you lent to your cousin five years ago. Here are three guidelines to help increase the chances that your next negotiation will produce the outcome you want.
Plan methodically. Develop a list of questions about how the deal will work, and prepare a tentative plan for implementation, specifying who does what, when, and how. Negotiators fail to push hard on implementation for several reasons. Some just haven’t thought about it carefully. Others fear that too great a focus on such concerns will slow the process or stop it dead in its tracks. Still others work for organizations that inadvertently encourage them not to think about implementation. General Motors, for example, created special teams for negotiating foreign joint ventures to manufacture vehicles and parts. Once a team had signed a deal, it would move on to the next negotiation, leaving to other executives the difficult task of figuring out how to carry out the new joint venture. Some managers called the practice “throwing the deal over the wall.”
GM’s reliance on special negotiation teams slowed and complicated the execution of the joint ventures. First, it gave negotiators, whose bonuses hinged on the number of deals they closed, every reason to downplay potential implementation problems, such as a partner’s questionable manufacturing experience. Second, the GM executives charged with carrying out the deals were effectively denied access to the knowledge the negotiating teams gained and the relationships they forged. GM’s experience provides a lesson for us all: when agents or employees negotiate on your behalf, make sure they have strong incentives to plan for implementing the deal.
Build relationships. A relationship is a kind of connection that usually implies a degree of trust between the parties. Such trust is vital in making a deal work since, as the Oslo Accords experience has shown, implementation always involves risks for somebody. Trust in the other side, based on a sound relationship, helps reduce perceived risks.
One essential step in relationship building is to ensure that the parties are well acquainted. For companies planning a joint venture or a merger, a retreat in a relaxed setting might allow the two sides’ executives to discuss their respective organizational visions and cultures. Joint training can also be effective. When the African National Congress and the white South African government sought détente, the leaders of the former combatants came together for seminars on negotiation and peace building.
Establishing good communication is paramount. Too often, negotiators assume that communication between the two sides will happen naturally once they begin working together. Instead, they should set up a schedule of regular meetings to review progress. And in international arrangements, it is crucial to minimize any language barrier. In one joint venture between an American and a French company, the two sides, which had some knowledge of the other’s language, nevertheless agreed that they would use interpreters. Meetings were twice as long as normal, but better communication paid off.
Above all, the parties working to build a relationship must show respect for one another. Each side must recognize that the other brings something valuable to their common enterprise. They need to treat one another as equals. To say—as one U.S. executive did to a partner from a developing country—“Let me do the thinking for both of us” only undermines relations.
Consider involving a third party. Third parties can help resolve conflicts, provide needed resources, and verify that both sides are holding up their end of the bargain. For example, the United States, which helped broker a treaty between Israel and Egypt in 1979, has been vital to maintaining peace between the two countries ever since. So think about involving an appropriate outsider in the next tough deal you negotiate.
JESWALD W. SALACUSE is the Henry J. Braker Professor of Law and former dean of the Fletcher School at Tufts. His most recent book is The Law of Investment Treaties (Oxford University Press).