I ran a seminar on negotiations at a big MNC in Shanghai yesterday. The participants were a mix of Chinese and European managers and salespeople who all had a great deal of experience, and are very high-level in terms of skills and authority within the company.
One of my main points was this:
“Don’t continue negotiating with someone if you know it won’t end up in a transaction. If there is a “deal-breaker” on the table, then that should be the first thing you deal with”.
The example we discussed was credit terms. If your company has a policy of only giving a maximum of 45-day credit terms, but the customer insists on 90 days, I say that you should try to reach an agreement on that point first. If not, it will ultimately kill your deal and waste everyone’s time.
A participant of the seminar disagreed. His logic was that if you agreed to all the other points first and saved your major SPECIFIC point of disagreement until last, you improved your chances of reaching a final agreement. He felt that if you reached a compromise on all the other points first, it would put a great deal of pressure on both sides to find a solution to the last disagreement.
We went back and forth for a while, and I understand his point of view. BUT…I think his way will only work under the following conditions:
1) Both sides agree that the potential “deal-breaker” exists.
2) Both sides agree to deal with it last.
3) You acknowledge that by investing time in this negotiation — which has serious problems – you are passing up the opportunity to do other business.
The pitfall here is that your counter-party might not understand that you consider a specific point to be a deal-breaker. If I am engaging in drawn-out discussions over many months and the other side suddenly comes back to me with a proposal that contains what I feel to be a deal-breaking point, I am going to be very angry if I think he has just wasted my time.
Look at this example. We are negotiating for sales training services, and I have the responsibility for finding a sales trainer in Shanghai. My company policy –set by the New York HQ — is to pay all service-related expenses 90 days after completion of the contract. I am negotiating with a sales trainer who wants to be paid in advance.
IF he tells me that we have a significant disagreement with the payment terms BUT he thinks we should “shelve” that issue – or delay dealing with it until later, maybe I will agree. Then we can discuss all the other points, and if we find that our companies are a very good fit, we may be able to work out a special case. I will have my boss contact the head of HR in New York and we will find a compromise – maybe pay him 20% up front, 50% within 30 days of the training, and 30% after 90 days.
BUT – and this is important – if we meet 5 times and I reveal a lot of sensitive information about my company and THEN he tells me about his company policy on pre-payments for the first time, I may feel he is not honest or competent. I may feel that he has wasted my time – or tricked me into telling him too much about my company. We have a special term for people who do this – we say they negotiated in “bad faith”. Not only will they not get this deal, but we will never discuss any future business with them.
Western negotiators tend to be very sensitive about wasting time in drawn-out negotiations that don’t result in a deal. Sometimes this can be useful to Chinese negotiators – it can put pressure on western counter-parties to reach an agreement or grant concessions. But it can also cause problems if the other side assumes you are negotiating in bad faith and are therefore not a suitable business partner.
