A five-year old American manufacturer of medical equipment has just secured a patent on its primary product, a new kind of heart monitor. The potential market is even stronger than the company imagined, yet its second round of venture capital funding is coming to an end. A few other manufacturers are about to go public with similar, though less well-tested, products. To shore up funding of the big launch, the CEO decides to explore joint-venture possibilities with several oversea partners.
There is a problem, though. She has never been involved in joint-venture negotiations before; what’s more, she has never done business with an overseas investor. Meanwhile, one of the European companies she approached knew all about her company’s internal strengths and weaknesses. The CEO feels she is in the best position to represent her small company’s interests in the upcoming negotiations, and yet she is extremely nervous. The company’s future is on the line. Does she have enough knowledge and experience to succeed?
When you’re approaching a new kind of negotiation, you need to be able to recognize when you’re in over your head. In such cases, it might be smart to quit before you even begin. That is, it may make sense to have someone more experienced take your place at the table – an agent.
Robert Mnookin and Lawrence Susskind cowrote Negotiating on Behalf of Others (Sage, 1999), and together they have identified circumstances in which agents will probably get better results than negotiators could ever hope to achieve on their own. To compensate for her lack of experience, the CEO could bring in an agent to make contact with overseas investors, explore their interests, help the CEO examine her own interests, generate the terms of possible partnerships, assist in evaluating each option, and even close the deal. By hiring an agent as her adviser or stand-in, the CEO could vastly improve her chances of concluding a successful joint venture.
Agents can serve a variety of purposes in a negotiation. If the CEO’s potential partners balk at dealing with her representative, she might involve the agent only at key moments. If, on the other hand, the partners bring their own agents onboard, the agents might converse among themselves, negotiating tradeoffs and packages in consultation with their principals.
Some experts suggest that agents can prevent negotiators from discovering the trade zone – that moment when they make the transition from adversaries to cooperative problem solvers. According to this logic, an agent’s own personal interests can clash with those of his principal and keep negotiators from finding common ground. Yet we’ve found that when negotiators carefully hand-pick their agents and give them detailed instructions, these skilled representatives can almost always lead parties into the trading zone and help them realize their goals.