SPOTLIGHT :Control the Negotiation Before It Begins Focus on four preliminary factors that can shape the outcome. by Deepak Malhotra can help deal makers avoid missteps at the bargaining table. But some of the costliest mistakes take place before negotiators even sit down to discuss the substance of the deal. That’s because people fall prey to a seemingly reasonable—but ultimately fauity—assumption about deal making. Negotiators often take it for granted that if. they bring a lot of value to the table and have sufficient leverage, they'll be able to strike a great deal. While those things are certainly important, many other factors influence where each party ends up. te ountless books and articles offer advice that_srovuir ov nie sortenspe oF wecararon Inthe article: grow oomyexpesence advising explained ati was mater opines we scoesof companies cn dal wort millonrorbi- a economies. Within hour they wee on plane, Torso ats topesent for ators thitcan ve not owing what would happen Aew cysts, {temendous impact on aston outcomes Is UheCEO called and ace the orga a facrease, provide uidange on what negottrs _Theuisy move wort out forthe cofounder, Should do before either side state making offers but t would have ben beter not tet hing go rennet. ‘wrongin efit ae. The mistake Was 3 com ‘onanefocwsingsomuctonthesubsancetthe Negotiate Process Before Substance _deslndnotenohon the pros Sutstnce she Necubleof yearyan two cofoundesof tech terms that make up the fl agreement. Process ‘etare waited into meeting withthe CED of how you wil get fom where You are toy t that Fonune too company wi had agreed fo ove agreement My adie to deel makes Nestape- Siemon withthe Aweskeatr the partes cessbefore substance actummerdouttheinvesnent amountand'val Conder anata scenario You'veben negott- ton, sth meeting was suppored tobe ceeba- ng wth someone for months You havea fe final for storettananytingeee Whenthecofounders concessions th youve been oldngac—tey"e tntted throm they wetesupedtosees em cos but worth making wil cls th dea ith framers and tankers The CED was also there, thefiiah ie imag, ou make the conesions, ‘ritaoonbecane lar thathewisrot going to andthe oter side responds: This sea appre sevey parpate ‘sey ety on ese sues Let earths ‘ssstonssthe cofounder own, the ankers wn bss tose tat she thinks” Unfortunately onthe other sd started torent the deal The fry, you had den your counterpart even had ‘Scnloninesment nail thetablebataow bos jouthought be was the fis deslon mabe, ‘hy demanded a muchlower alata ter Thenegottoneie daly nat ov and you have ws the cofounder weld havetogiveup sips nothinglo ge, CntymoreslyTheeatenptstoeraadhstanThemmore crit and commitment you have esamenthadaeadyteenrehedweretonoaval garding the process, thes key you aetomake ‘at was ingot? Had the cofounder misun- sakes on substance Ngo proces ets destoodthelevelofcommitment inthe pevout desing and inoencig range of factors that Iveting? Had they overlooked steps snvolved inf wiaffec the outcome ofthe del Ask the oes tinge Gel Hnethe CBO utenddoreneral party ow much tine does your company need engeorfadhis tem conned him thathe del Clove the dea? Who must be on bate? What fe- foaldbesnestned? tors mightslow don oc speed pth proces? Are Upset and confused the cofoundere qi as- there ey milestones or dtes we should beware seat hr optons Acepingte nee dea! oulé off Remember toad out simple things sch 3s, Far finncally(ndpyehlogaly,butthey4get_Whovwlbein the oeetingoncrow? Whstwilthe {Desiomilon needed fds On the oter and, agen? Since weare ot going to discs thes thangso would igniantiyunderahi wt ty Sos of mporanceto sin the next meting when ‘bougittotetale, They deisedtowabcout wth wile adress then? ‘ura deal Before they ef, they emphasized the Ofourse, you a alays gt car answers to ‘Goong deste todo adel onthe nll ems and__ every question a the outet~and sometimes its Tell your counterparts what to expect in the negotiation process. This allows you to pees how they’II interpret a negative event should one occur and to ensure that they don’t overweight its significance. Yona rin BeanbagCONTROL THE NEGOTAION BEFORE I BEGNS HR. ‘wt emosten ‘te souuTion Sone othe cost misaksin our sates canal et te tage fora rept tae piace before anyone succes pga, sdown atthe bapning able. hats = nego tas mates of becuse del makerstendtofeuston "paces arte ear ‘mut on substances, coutrfer, «Tyme lac expan. oneassons—and not enough on presse «They need ney dey al aps hat leone or eltnnesd yt de, + Athy mas et epee ame ‘tough ih the eal be vee Premature to ascertain qetons But you shouldnt ths process, you going to até eachother ‘eektoclafy and eich ueenentonasmanypro-_eren mere Aad when tht hagpens Lat you ‘ess elements as possble~and weary sis appro. emer someting Thats somal Dlate-toavldtambligonsibance te Ifthe mediator doesnt this waning, the ties aremuchmoreliely tosbandan te process D Normalize the Process wen emetions helen and hing sem tal A bosinesman who ows uiplemanufac- lag apart Buti se expan at the ute thts ‘uring fcesinAizoneetotmethathenolonge normal for things tpt worse ene they ex oss busines with companies the West unless ty the patie are motley weep ate by nos ‘eirtopmanagesarewillngt fst fy ntohisetymasing the proces abe fect manage ce ‘omeet with im. My ital hougs wee sth expecta shoutego?isitaboutbuldng relationships sta "The hme place apples to any negotiation altura nom ota ofsomesor? actly none whee tees ak that unge lns gesec ty those hdanthingto do wit isprecndiion'o emovthly ifyeu ancpate deans oc aeons Seningn conc. fon your side, tell your counterparts This lows Heres how he explained to me: “Until they you to shape how they wil iterpet + neeaie ‘ave flown into my ity andthen diven to our Sventshuld one oceur tnd tenors at ty oe manufacturing plans—which ae located 20 lo not neritic touhneee ey ‘eters fomthesiporbuttlelmst thee hous harder tine tying otaoene the pereptins toreach—until they have exesened tat, they win bck the rs ater someting go aoe simply dont understand how hing week around tat they dd nocexpe bere. Anditthey doo under wera ntser- Normalizing te proces ental cussing. cusprobems. Becsethefittinetheretsadelyy advance anyfctorstht might este ther ie ‘x suption, orf we need renegotiate some togucton out intentos rity er todo tic ‘hing they wilimmedtely assume weare ether hlallood of x successful outcome You ght ox ‘ncompetent or stealing rom her. Once they've pin yal barista eed a beonecone, seonhow things actual work wecantaveamore mens dringthe process when Breomanteing: odsctveretonship” ‘esto fel amos pessimist evs hat gh Unless business partners understand what is delay progres, andthe iference between ate “norma” inagivencotextorcutire, they arelkey dors that are commonplacandeas tercaho es {omisunderstand or overreacto adverse events, coe that se ote ser, ‘Teesameistrucin negtatonsofall kinds: Risin Encourage the other se to do the same for ‘ecanttonamatzetteprocesyouveeverbeen you. People often estate to disc "wbat ight ‘nvotedinan ugly cont that entintomediton, go wrong because they ocsed oo presenters youmay ave senthisinaton When agoedied”themuclvesand tenets aftedelntkcloa oe erst ov withpatis whoaeinabiter pute, sible ight, Tiss eopecaly ue inceratn canes shomight sy somethingtk, fou hink you hate and in contexts where competion eee, Tone ‘ichotertody?teanasireyoabouttiee days counterpart ight be hiking “Why shoulda,sree on me srren soe oF NEQOTAON stout problems fy sivalsae pretending things biterly-that saben reltionshipberween swllbe es?" ‘ny two partes in he nestaton can sudcenly tsunderstndable,Iother parties think become nective of even dsastous when you the business otha oul se aualever clint to valat the inte, constant te total greater oncesons, theyre nie to naive, and perspective fall the relevant parts, ‘etruthfl Toenceurage peopletobe open about One ofthe things we ote at was how mich eo [poblens, ket afefor them, psi that you wityeadhpartyhadandhow machoftheboard each eenperncedencughtoknow tatever/dealand one conta ‘etna kel to encounter dale nd “isrptons, and iat you want learn more about the pec karst mgt a aren his Taneeorunowamcr ‘cae And you ea eal (rom baving no ‘cOWANY x ‘reno flanger ctor aes he, YO 2dotahares ave beter hance of eacing an understanding hoard acate ‘hat work for bath es, > fap out he Negotiation space conan a Someyearsage ache ofiine waspeerring 3/3 ofahares {oselhrstateinasompary that wast owned ‘board vats yf entes Towers been quabgfor any yrs asl thatthe eset would ned tobe consaldted der one pty pebapetwo We then focused onthe interests of each com eho could pet lop war seo la tht noone pany What exact are the interests inthis eal? trated tosel. However there wae ite elce in Now woud you rank ter pits? The Fur pr Thematerbecaus one of the owners-Company Ses bad known one ance lngtime and myc Xow ainichlgercompany wate power and enti not have any tecbleentisying what mat the dout to push people cut announced tht tered most wo ect. Company X for ample, wat woul by ut the eter ‘mncemed abou rests, and spices ere ‘My clent wanted tows at Company Xhad_ flows) Reputation wan es with ‘ought outth ote ono onners before eget any egaizaton that cold ut its eputation.@) thesalofhis shar Hefiguredtharbybengthe Cont wanted ownership ony in esinsses latpeceotthe pus bewoudbesbletobaldout _whereithad majority fad sexs and) Money fermore money. would wantopayastiteas pss buthiswas When wemettodisushlssratpyIaedhin notashigaconceasretaton and oat. tosteptack and tap out the negation space” Aer Selig ito hepespecves fal pats, Thisconssteof every pty that ean fect the ne we unearthed one moreimportant it of informa tration along waheny pry hat wil beafected ton: Company Arash last nested in sling Eth negtotion in my experience, aetrtegy and was aeadyputingup 2 ta could dag that makes peset sense when youre tsking, tiysout You put yourself at a disadvantage when you focus narrowly on the party on the other side of the table. You have to assess the perspective of all the parties that can influence or are influenced by the deal.‘en wept hese deta togete became slearthat the “st piece ofthe purl stnteny ould beutwise, Wiy? For Company , contol was 2 hehe prcrity ‘an money. To pt cont, seed toby ether ny eet o Company Aas soon ait made ther Purchase, would canto more than 50% a the ‘oar sets and hence the eanpany or mos det sons) Therefore fmy eet were elt tos he would be negotiating with Campany Kalter ithad ‘contol Atha ime my er would beable to get ld onl fr his 6 shar oh fins eu. Be ‘the wero sl fst ata tine when Company A wasrefising sll and was akg thing ficult for Company Xe could maratize two set his shares and his bard seat In ether weds the as arty tonegtte wold vet everage a Simitedopportnies to menetae assets. "herel wel you'll nee haveacompitea pictures yor ke, but you pt yourself a ater asasignfcant efeconwhere ny edu Arete Dai eating the aeacon aa problem sang The psychological lens through which parties view a negotiation has a significant effect on where they end up. exec rasa to be won? Ar they poking at itasameeingof equals of do they preva i ‘rece situ? eth oss nthe longer othesor te? Areconcesionsexpete, ore they seen assent weslnes? rectve negotiators wil see to contol or ad sus theme earl inthe proces ideal, before ‘hesubstancecf the deal seven diced Hereate thre elements oftaming that neprnos woud be wise toconsde Value versus price. ve worked with many ‘echaoogy companies whote innovative products Drovide tremendous rae fr eufomers bt ate ‘reed stpiicant higher han what thet compe ‘orsarechagiag—or what csteres te pang Uherlegacy stems While the high pre utd by the aie proposition, salespeople afen fae ‘modi sesstance when poeta user ars ‘thatthe cot willbe ie 10 ime the amount he iscurenty paying. To often, the salesperson will Dea something Ike: "You are chtgng ive ines what oes change Nooo pys that mich ors edorthng (ne te most common mistake slespeope ‘maken thse suationswithot even elng ‘tcisto aploge for having hgh ple. 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