Monday, August 16, 2010

"What Are We Doing?" Setting Goals in Negotiation

One of the most fundamental errors negotiators make when trying to address a new issue or solve a problem is failing to establish with the other party the goal of the negotiation. On its face it sounds ridiculous. After all, how could two parties come together and never share with each other what they are trying to accomplish? Would two people get into a car to begin a trip without discussing where they are going? Of course not. Imagine the driver heading south to Philadelphia while the passenger is holding a map of Boston! Would the passenger wait until she was standing in front of the Liberty Bell to say, "I thought we were going to Boston!"? Or would the topic come up when she saw signs for Philadelphia?

Parties in a negotiation can be going in different directions and never even realize it. The outcome is they negotiate their way to a compromise, halfway to their respective goals: New York! Neither one is satisfied because neither ended up where they hoped to be.

Consider the story of the entrepreneur and the investor. The negotiations appear to be about the investor trying to buy one of the entrepreneur's businesses. But for some reason the entrepreneur doesn't seem willing to agree to any of the multiple options on valuation, compensation or transition. In fact it feels like the entrepreneur doesn't even want to sell!

Maybe it's time for the parties to discuss whether or not they understand each other's goals.

Investor: "We seem to be struggling to close out some of these issues and I thought maybe we should stop and spend a moment to make sure we both still want to do this deal. Could you share with me what this deal means for you and why you are interested in doing it?"

Entrepreneur: "Well, frankly, when I told people I was interested in selling the company I hadn't expected things to move so quickly. My real goal was to raise money by the sale of this company to fund some of the other companies I am trying to grow."

Investor: "I don't get the sense you want to sell this company."

Entrepreneur: "As we've gone along, I have to say I am having second thoughts. This was my first company and it's kind of my baby."

Investor: "Well what if we shaped the deal differently? My goal was to purchase your company to get access to your technology for the industries I am focused on. What if we did a licensing deal instead? License me the technology so I can go after those markets that you don't seem interested in."

Entrepreneur: "Now that is interesting because I would be able to raise the money I need without selling the business or creating a competitor in my space."

Maybe the parties had started their journey with a common goal. But the investor, staying focused on what the entrepreneur was saying and how he was reacting to the brainstorming, recognized something had changed. The delicate part was finding the right way to ask the entrepreneur to share his goals. Once they started that dialogue, it became clear quickly that the goal was no longer a shared one and the parties needed a new plan: let's go to Chicago!

Poor communication is the single leading cause of issues that arise in a negotiation because the parties are often afraid to talk openly with one another. Positional negotiators are especially prone to this behavior because they fear that sharing information might give the other party some advantage, like finding out what they really want. Ask yourself how one party is supposed to help the other party get what they want if that party won't share what it wants! Positional negotiators simply state that they want X without any explanation of why they want X or how X will help their business.

As a Deal Whisperer, start your negotiations by trying to understand the outcomes of the other party and what you hope to accomplish. Brainstorm on other options that might achieve those objectives. Be open about your own goals as a way of modeling the type of dialogue you'd like to have. Once the parties have articulated their respective goals and see where their interests overlap, the journey to "done" becomes clear.

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