To maximize the joint gain created by a deal, both sides need to take risks which requires building trust in negotiations. Here’s how negotiators can establish the necessary trust.
What began as a misunderstanding about specifications and deadlines between a manager at RLX, a software development firm, and a manager at Impress, one of its clients, had escalated into a conflict charged with growing mistrust. Both RLX and Impress had money to lose if the partnership ended, but in the heat of the conflict this became a secondary concern. Just two weeks after the first flare-up, Impress announced that it would be taking its business elsewhere.
Kristen worked in a division of RLX that had few dealings with Impress, but she nevertheless approached her manager, who was also the VP of the division that had lost the account, to ask if she could try to win it back. After all, RLX had nothing to lose by letting her try, she argued, and she had her own reasons for taking on this formidable task – as part of her work toward an MBA, she was taking a class in negotiation and mediation, and “negotiate something in the real world,” was her current assignment. The VP eventually agreed to put her in touch with the Impress representative. After a number of meetings and a lot of negotiation, Impress agreed to re-sign with RLX, and Kristen saved her firm more than $25 million in annual revenues. How did Kristen pull it off?
She realized that to win back the account, she had to win back their trust – and fast. So, before the first meeting took place, she took several critical steps:
– She became an expert on Impress and its needs. This included talking to the RLX manager who had handled the account to find out the concerns Impress had before the conflict erupted.
– She arranged to offer Impress a few perks in a new contract as a show of good faith.
– She asked the president of another RLX client, who knew people at Impress, to speak with the partner at Impress about her own positive experiences with RLX.
While the RLX-Impress negotiation was particularly tricky to get off the ground, establishing trust is critical to achieving success in any negotiation, because all negotiations involve some level of risk. Negotiators usually say that they’re prepared to bargain in good faith, yet talks sometimes collapse because each side lacks trust in the other’s competence and good intentions. One party might want to make a concession or share sensitive information in the hope of inspiring disclosures and compromises in return but there’s always a risk that the other side will refuse to budge, or even worse, exploit the information to their own advantage. Trust is particularly elusive in high-stress, high-stakes conditions, as when you’re negotiating with strangers, facing deadlines, coping with differences in power and status, or hammering out unenforceable contracts.
Trust may develop naturally over time, but negotiators rarely have the luxury of letting nature take its course. Thus it sometimes seems easiest to play it safe with cautious deals involving few tradeoffs, few concessions, and little information sharing between parties. But avoiding risk can mean missing out on significant opportunities. For this reason, fostering trust on the fly is a critical skill for managers. As Kristen knew, the first step to inspiring trust is to demonstrate trustworthiness.
Here are six negotiation strategies for inspiring trust in negotiations:
1. Speak their language.
2. Manage your reputation.
3. Make dependence a factor.
4. Make unilateral concessions.
5. Label your concessions.
6. Explain your demands.
Maximizing Joint-Gains and Value Creation in Negotiations
Believing that the other party is competent and has character allows negotiators to take the risks that are necessary to achieve negotiated agreements, and to implement agreements in ever-changing social, economic, and political environments. When profit, security, or peace depend upon the motives and actions of another party, trust becomes essential. Fortunately, as these strategies suggest, negotiators can build the trust that’s necessary for a negotiation to yield maximum gain.
Adapted from “Risky Business: Trust in Negotiations” by Deepak Malhotra (Professor of Business Administration, Harvard Business School) Originally published in the Negotiation newsletter, Volume 7, No 2 (February 2004).
Originally published on September 2, 2011.