Understanding Relationships in Negotiation
Understanding the relationship between you and the other party is crucial to your success in a negotiation.
Relationships in any negotiation are critical to understand. You have to step back, look at the players, and really appreciate how important the relationship is to you as well as how valuable the relationship is to your opponent.
Is this a long-term or short-term relationship? You have to look at the past history you’ve had with this individual as well as the future history they want to have with you. By understanding if this is a new relationship or if you’ve got history, it’s going to inform your negotiating approach. Relationships make all the difference. Failing to consider those relationship dynamics can win you the battle in that short-term negotiation, and you may get the deal done. But long-term, you’ve lost the war and the long-term contract. This can make future deals harder to do.
For example, I was conducting an acquisition, and we had a mid-term challenge with the person we were purchasing the business from. We had a relationship with them and that relationship was important to us, but the relationship didn’t matter to our opponent. He was changing industries and completely moving on. But we had a reputation to protect. So the relationship dynamics in this situation were uneven.
We had to approach the negotiation differently than he did. We had to handle this deal very carefully because it was going to impact future acquisitions we were looking to do. This individual would absolutely talk to other people who were trying to sell their business to us, and he would either say nice things or not-so-nice things based on the way this negotiation went. For him, it didn’t matter what the ongoing relationship was because he was getting his money and moving on. The dynamic this situation created was that we were much more willing to make concessions while he was able to take a much more aggressive negotiating approach.
In the end, we made a lot of concessions to keep him happy in the negotiating process versus trying to extract the most value we could from the deal. Ultimately, in the short term, that looks like it wasn’t a great decision because we overpaid for his business. But long-term, that relationship mattered, and he said some great things about doing a deal with us.
As you look at your negotiations you’re entering into, understand who the players are and what the relationship dynamic is. Once you understand it, adjust your negotiating approach appropriately.
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