How Principal Agent Theory Works in Business Negotiations: Dealmaking Strategies for Bargaining with Agents

How to know when to sit out on business negotiations

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Business Negotiations

The Program on Negotiation has identified three basic sets of circumstances in business negotiations where you’ll be better off tapping an agent (see also principal agent theory) to take your place at the bargaining table (at least for part of the negotiating process):


Discover step-by-step techniques for avoiding common business negotiation pitfalls when you download a copy of the FREE special report, Business Negotiation Strategies: How to Negotiate Better Business Deals, from the Program on Negotiation at Harvard Law School.


1. You’re unfamiliar with the issues and rules at hand.

Sometimes negotiations lead you out of your comfort zone and into unfamiliar territory.

When you’re unsure of the issues under discussion or the rules of the game, you’d be wise to seek out an experienced agent.

For instance, a scientist interested in securing support from investors for a new start-up would probably benefit from having a skilled lawyer or IPO specialist represent him.

Similarly, someone who has never sold a house might prefer to have a real estate agent negotiate with prospective bidders and close the final deal.

2. Time or distance prevents you from doing your best.

What if you’re due to begin talks with someone in a distant city or country, or under a tight deadline to hammer out a deal?

When you don’t have the time to meet with potential partners in a distant location or participate in every step in the process, you’re unlikely to represent yourself well.

In such cases, you’ll probably want to find an agent who specializes in the type of negotiation at stake. A California writer who has never dealt with commercial publishers, for example, should probably enlist a New York-based literary agent to sell her manuscript and negotiate a contract.

3. You have a poor relationship with your negotiating partner.

Imagine you’re facing – and dreading – negotiations with someone you’ve clashed with in the past.

By bringing in an agent, you can calm tempers and better ensure that talks are businesslike and amicable.

This strategy plays out most dramatically in contentious diplomatic contexts, such as the negotiation of a cease-fire between warring armies; factions might bring in representatives they both trust to hash out a peace agreement.

In the business world, when rancor between a company and its employees over a work contract is deep-seated and ongoing, both sides may need to employ experienced agents to move talks forward.

In short, whenever you’re worried that you won’t be able to pursue your interests effectively – especially in the face of aggressive behavior on the other side – you’d be well advised to find an agent to represent you.

For more negotiation advice, please read the following articles:

Have you ever had to have an agent take your place during business negotiations?


Discover step-by-step techniques for avoiding common business negotiation pitfalls when you download a copy of the FREE special report, Business Negotiation Strategies: How to Negotiate Better Business Deals, from the Program on Negotiation at Harvard Law School.


Adapted from, “When You Shouldn’t Go It Alone” by Lawrence Susskind in Negotiation,  March 2004.

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