Accept disagreement. Don’t worry if you and your negotiating partner disagree on what the future may hold. Contingent agreements allow you to sidestep the need to agree on whose forecast is most accurate. Create one possible scenario that describes what the other side assumes will happen. Next, outline your own scenario of what you think is more likely to happen. Finally, spell out expectations and requirements appropriate to each scenario. Include both scenarios in the contract. In doing so, you’ll create an agreement that all sides can live with. Added complexity is a small price to pay, as long as clear triggers and monitoring arrangements state exactly when and why one scenario or another kicks in.
Forecast benefits. To overcome organizational resistance to contingent agreements, you’ll have to describe the benefits that balance the costs of complexity. The legal and financial experts who prefer less complexity are just trying to do their jobs. But if you can show them how multiple contingent scenarios can head off potential crises, you can head off their defense of simplicity for its own sake. Contingent agreements offer an easy way to win at win-win negotiation. You put the terms you prefer into the agreement—based on your forecast of what is most likely to happen—and the other side accepts them, along with their alternative forecast (which you don’t think is correct) coupled with the conditions they prefer. Assuming your forecast is correct, you’ve won the value distribution battle without a fight.
WHAT’S SPECIAL ABOUT TECHNOLOGY-RELATED AND OTHER KINDS OF COMPLEX NEGOTIATIONS?
CONTINGENT AGREEMENTS CAN BE especially helpful in coping with the uncertainty surrounding technical issues such as finance and software, realms about which executives may know very little. Whether you’re bargaining over the purchase of a new companywide computer network, coping with a possible infringement of patented technology, or seeking better customer service from a software supplier, uncertainty is a fact of managerial life.
How do negotiations about complex systems differ from those that are less technologically complex? You can anticipate that four specific problems will crop up more often in the technology arena:
1.Complexity. Negotiations over complex systems such as new technology require sophisticated knowledge of hardware or software that’s beyond the expertise of most managers. If those trained in science and technology assume that others at the table speak their language, serious misunderstandings can result. Often technical advisers talk over the heads of non-tech people, and less technically sophisticated managers agree to things they don’t fully understand.
2.Uncertainty. When highly complex systems are at stake, no one can be sure whether they will perform as promised, especially when configured for a particular business environment. Different estimates of how a technology will perform can lead to long, drawn-out negotiations.
3.Egos. People who design or advocate for a new technology often become additional players when they have a vested interest in the outcome of a negotiation. Technology advocates—and their egos—can complicate otherwise straightforward talks.
4.Organizational change. The various organizational changes that often come with the introduction of a new technology can provoke conflict between parties during implementation. Staffers may have trouble maintaining or repairing new technology, accessing its intellectual underpinnings, or acquiring replacement parts.
Negotiators embroiled in a high-tech deal must find purposeful ways of avoiding these pitfalls. I have identified three primary strategies that will help you sidestep them—avoiding communication errors and building trust, managing uncertainty using contingent agreements, and preparing for strategic realignment—which I will discuss below. But first, a vignette to illustrate them.
“Cremtech Corporation,” which develops and manufactures leading-edge glass and ceramic products, was considered the industry leader in terms of innovation and profits for many years. Recently, however, Cremtech has faced growing competition, and its profits have slipped. The company’s CEO has asked senior management to eliminate technologies that have not found significant markets or applications. Such technologies drain production capacity and create heavy handling, shipping, and customer support costs.
“Advanceramics,” a Cremtech competitor, recently offered $2.5 million for Cremtech’s “Hexiglass” line of extrudable glass products (products made by molding glass using a die). Hexiglass, which has only six customers who order twelve products, is manufactured and sold by twelve employees. If selling the line isn’t feasible, Advanceramics is willing to license the production technology for two years.
Three senior managers at the facility where Hexiglass is produced have been asked to negotiate the product’s future: the product line manager for specialty ceramics, the vice president of R&D, and the plant manager. Not surprisingly, they have different ideas about whether to accept the offer from Advanceramics. The R&D VP, who invented Hexiglass, is strongly opposed to selling the technology. He wants to mothball Hexiglass, store it on site, keep the team in place, and test new applications until demand skyrockets, as he is convinced it will.
The product line manager wants to accept the Advanceramics offer. The sale of Hexiglass, she believes, will bring in cash and increase short-term productivity. In addition, she hopes to impress the CEO with her ability to pull the trigger on a good deal.
The plant manager doesn’t want to lay off veteran employees; he favors licensing Hexiglass technology for a short-term cash infusion and keeping the team together. If demand grows rapidly, as the product manager predicts, Cremtech will be ready to restart production immediately. Notably, the legal department is worried about the intellectual property risks associated with any licensing agreement.
Though this negotiation is among people working for the same company, it exhibits the four problems salient to technology deals—and, as it happens, the same problems that would arise in talks between Cremtech and Advanceramics. First, the varying extent to which the negotiators understand the technology is likely to color their views of the three options—sell, mothball, or license. Second, uncertainty surrounds long-term demand for the product, as well as the question of whether shutting down Hexiglass production would increase plant efficiency. If demand truly will skyrocket, then mothballing the technology makes sense. But if the R&D VP is wrong, Cremtech may never get another bid on the technology. Third, ego becomes a factor: the R&D VP may be blinded by “inventor’s bias.” Similarly, the product manager’s major objective seems to be impressing her boss and the plant manager wants to retain veteran employees. Fourth, temporarily licensing the technology could lead to unanticipated organizational realignment as staff reassignments and the need to build a new relationship with Advanceramics create additional demands. If the competition ends up launching its own version of the product, further changes will be required.
Given these complications, how should the managers proceed with their negotiation? The following three strategies will help them navigate these difficulties—and they can guide your next technology or other complex negotiation as well.
Avoid Communication Errors and Build Trust
BECAUSE OF THEIR COMPLEXITY, technology-related deals are rife with miscommunication. Negotiators tend to make assumptions about a technology—how it will work, what its future demand will be—that color their messages and leave them more likely to hear what they want to hear and block out the rest.
Negotiators can avoid miscommunication about technology by agreeing on explicit procedural ground rules before getting down to substantive business. For example, the three Cremtech negotiators might agree that: (1) they will present their arguments without interruption, (2) one person will draft a discussion summary for review by the full group before speaking to others about what transpired, and (3) they will use specific criteria to assess alternatives. Procedural ground rules not only promote understanding but also improve the odds of reaching a creative agreement that responds to each party’s key concerns.
To better understand one another, the Cremtech manage
rs should find out all they can about the rationale behind the other side’s proposal and the reasons they disagree about it. This is best done by asking lots of questions and listening carefully to the answers. In addition, the managers should use simple, jargon-free language to make their points and supplement their statements with visual aids whenever possible. Finally, rather than merely observing others’ reactions, they should ask for elaboration on any points of disagreements.
Often, the advocate for a particular system (whether that person designed it or not) becomes blind to the weaknesses of that technology. The R&D VP’s ego, for instance, could make it hard for him to listen without defensiveness if a message appears to threaten his identity or reputation. To neutralize a situation involving inventor’s bias, bring in an impartial expert to provide an independent judgment of the technology’s strengths and weaknesses. Similarly, the Cremtech negotiators might seek an independent financial analysis from a consultant who is less concerned than the product line manager with impressing the boss.
Whenever technical complexity threatens to impede communication, it’s important to emphasize trust-building measures. Negotiations about complex topics such as technology often require multiple rounds of give-and-take, as parties check with their legal departments or superiors in response to unexpected proposals. Trust can break down quickly during these interactions—for example, if one party alters a previous offer. How can you build trust? Quite simply, by saying what you mean and meaning what you say. Don’t sugarcoat bad news, and don’t make commitments that you’re not sure you can keep. Once trust is lost, it’s incredibly difficult to rebuild.
Manage Complexity and Uncertainty
PRIOR TO A NEGOTIATION, it’s in everyone’s interest to learn all they can about the technology under discussion. This may require a substantial investment of time. Even if you’re planning to bring a technical adviser to the meetings, you’ll still need a rough sense of the technical or scientific principles involved, the options available, and the obstacles to effective implementation.
Negotiators also need to make time pressures and ambiguity work for them. The idea of mothballing the Hexiglass technology until the market catches up may well be a smart response to market uncertainty. By contrast, leasing the technology might bring in short-term revenue, although even the strongest contract won’t eliminate the possibility that a competitor will use its access to formulate its own version of the technology. Both ideas respond to uncertainty, but with different downside risks.
In my research, I’ve discovered that those who can live with ambiguity a little longer are more likely to reap substantial benefits than are those who seek to quickly eliminate it. One novel way to accept uncertainty is by making contingent offers, as discussed above—promises that negotiators add to sidestep differences regarding what the future may hold. A contingent agreement might include a table that accounts for many future scenarios, including different prices, deadlines, and obligations for different versions of the same basic agreement. Contingencies add complexity and sometimes, as noted earlier, incur the wrath of a general counsel whose job it is to define and limit company liability. They also make it difficult to book the value of the deal (and allocate bonuses) when an agreement is signed. Nevertheless, when uncertainty is high, all parties will be best served by spelling out who gets what under a variety of scenarios. Whosever forecast turns out to be right gets what they expected. The others can turn to the schedule of alternatives and be clear about what they will get as well.
Anticipate the Difficulties of Strategic Realignment
ALMOST ANY AGREEMENT the Cremtech negotiators reach will require ongoing organizational realignment. New staff members probably will have to be trained, while longtime employees must be let go. Managers may need to reassign responsibilities, adjust reporting lines, and impose performance guidelines. The company may have to alter supply chains and invest in retraining. Such strategic moves will disrupt relationships and work patterns—and make a lot of people uneasy. And while most negotiators expect organizational change to be difficult, agreements about complex areas such as technology rarely take adequate account of the strategic realignment likely to be required.
When these negotiations imply changes in organizational structure, values, and procedures, you’ll need to approach them with a clear understanding of the organizational (not just personal) stakes involved. Specifically, follow three “before, during, and after” steps. First, consult in advance with anyone likely to be affected by potential changes. Second, stay in touch with those individuals during the negotiation, and consider giving them a say in the final outcome. Third, make sure your promises about what you will and won’t accomplish in the near future are realistic.
Merely insisting on or promising organizational change is unlikely to produce the desired results. When you’re altering systems, strategy, or values, resistance is almost inevitable. Getting people to change what they think, what they do, and how they do it is usually a grueling exercise. In addition, someone must be responsible for managing technological change and guaranteeing the resources needed to get the job done.
THREE STEPS TO NAVIGATING YOUR WAY THROUGH HIGH-TECH NEGOTIATIONS:
•Avoid communication errors and build trust
•Manage complexity and uncertainty
•Anticipate the difficulties of strategic alignment
Three Ways to Be More Effective at Technology Negotiation
SINCE NEGOTIATIONS ABOUT TECHNOLOGY are complex, they are particularly susceptible to miscommunication and misunderstanding. To increase the chances of winning at win-win negotiation when technology is the focus, there are a few prescriptions I can offer:
1.Acknowledge strategic conflicts. Organizations do well by assigning different people to care about different goals and objectives (e.g., cost reduction, innovation, customer service, quality). When these goals conflict, it is essential to create a forum for discussion in which everyone’s goals and concerns are valued, so that options for mutual gain are more likely to emerge.
2.Similarly, if you value working relationships, be careful about appealing to “what’s best for the company.” Be especially cautious if doing so means asking someone to incur real loss or risk without acknowledgment, compensation, or realigned performance measures. Keep in mind that “what’s best for the company” will be judged from each manager’s particular perspective, no matter what initiative is being advanced.
3.Don’t waste time arguing about who has the better crystal ball. Technology platforms and materials, market conditions, and innovation all create a difficult forecasting environment. Instead, develop proposals that include contingent agreements in the form of “If X, then Y.” Different expectations or beliefs about the future can be handled efficiently in this way.
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WRITE THEIR VICTORY SPEECH
Help the Other Side Sell Your Best Deal to Their Back Table
BUILD BOTH OFFENSIVE AND DEFENSIVE COALITIONS
NOTHING IS EVER AS SIMPLE as it seems, including most two-party negotiations. They’re actually multiparty negotiations because, in addition to the people negotiating at the table, there are back tables involved. Every savvy negotiator knows he has to find a way to appeal to the other side’s back table—to build a winning coalition with them. They are the ones who have to approve whatever the terms of the final deal might be.
Then there are situations in which there really are more than two parties (not counting back tables). Keeping track of the interests of multiple parties (including multiple back tables) and building a winning coalition can be difficult. Moreover, this often has to be accomplished while others are trying to form winning coalitions without you. Building a winning coalition or a partnership with your negotiating counterpart’s back table or with others in a multiparty negotiation requires careful preparation. You need a way to get others to see that your proposal is so much better for them than no agreement and that they can’t afford to turn you down.
Two-party and multiparty negotiations share one important feature: finding the trading zone as quickly as possible, so you can move on to proposing deals or packages of trades that are a little better for others than their next best option while being a lot better for you than your walk-away.
If you’re trying to move your counterparts’ back tables into the trading zone, you will need to: closely attend to their needs and interests, put forward proposals that incorporate value-creating benefits for them, offer strong arguments on behalf of the package you are suggesting, and agree on problem-solving procedures that will cause your counterparts’ back tables to push them to accept your proposal.
Preparing for Multiparty Negotiation
IT IS IMPORTANT to pay close attention to potential conflicts or differences between the interests of your counterparts at the table and their back tables. Similarly, if you see a blocking coalition forming, you need to be able to estimate what their back tables are likely to end up with, and top it. Assessing the other sides’ walk-aways means putting yourself in their shoes: gathering the same kind of information you needed to make the same kind of estimates for yourself. When you’ve gotten a fix on someone else’s best alternative to a negotiated agreement, you’ve identified the bare minimum you need to offer them to get them to say yes. You don’t want to offer more than you have to. You don’t need to provide everything they want; you need only to match what their realistic walk-away will leave them with. Of course, your negotiating counterparts may be willing to gamble. They might be willing to pursue a very small chance that if they turn down your perfectly reasonable offer, some unknown negotiating partner or opportunity will appear and offer them something even better. The time when they are thinking along these lines is when you need to get a message to their back table, letting them know that their negotiator is on the verge of turning down your very reasonable offer for a highly unlikely bet.
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