Adapted from “The Deal Is Done—Now What?” by Jeswald W. Salacuse (professor, Tufts University), first published in the Negotiation newsletter, November 2005.
Whether you’re manufacturing audio components in China, providing data-processing services in Chicago, or constructing a cement plant in Cheyenne, Wyoming, the quality of your relationship with a contractual partner is often the difference between a successful deal and one that falls apart. Here are three concrete guidelines for fostering a strong relationship between negotiating partners, drawn from Jeswald W. Salacuse’s book The Global Negotiator: Making, Managing, and Mending Deals Around the World in the Twenty-First Century (Palgrave Macmillan, 2003):
1. Start forming a relationship before you sign the contract. While negotiators must necessarily be concerned about a deal’s contractual provisions, they should also lay a solid foundation for a business relationship from the very start of talks. Unfortunately, many dealmakers do not. In one survey, I asked American executives whether their primary negotiation goal was to reach a contract or start a relationship. Fifty-four percent were focused on hammering out a contract. Their chances for a successful deal would be far better if they thought of themselves as relationship negotiators, not just contract makers.
This can entail the following relationship-building activities: 1) establishing a positive personal chemistry between the leadership of the companies involved; 2) understanding and respecting each other’s cultures, expectations, and goals; 3) putting mechanisms in place to foster communication after the contract is signed; 4) ensuring that the proposed deal is balanced and advantageous for both sides; and 5) identifying and planning for potential obstacles to implementation.
2. Select the right people to manage the relationship. Launching a business relationship requires diplomacy as well as technical expertise. To lay a solid foundation for the relationship, each side should select people with the appropriate interpersonal skills, knowledge, and sensitivity. Indeed, these qualities may be more important in the long run than the technical knowledge of engineering, marketing, or finance. Just as diplomats must be vetted by the receiving state, parties to alliances might agree that executives appointed to manage the relationship should receive the approval of the other side.
3. Closely involve negotiators in implementation. Too often, companies signing a long-term contract assume that a solid working relationship will develop automatically. For example, General Motors negotiated a series of joint ventures that ran into trouble once GM and its international partners began working together.
Why? Because the teams that negotiated the deal were not involved in implementing it. After GM negotiators formed a joint venture, they’d move on to the next deal, leaving other executives with the task of figuring out how to make it work. Within the company, this became known as “throwing it over the wall”—that is, negotiating a deal and leaving it to others to make it work.
During negotiations, both sides gain an enormous amount of information about each other and the deal. In the process, they may very well form a positive relationship. To mobilize these valuable assets, the negotiators themselves should play a role in implementing the transaction, at least in the beginning.