Negotiating is a big part of running a business. If things go well, both parties agree on the facts and work together to find terms or compromises. The result in these cases should benefit everyone in a meaningful way. All too often, however, negotiations fail, either because of SIN – stubbornness, irrationality, or narcissism. Selfishness, disagreements about fundamental facts, or disagreement about the reasons and merits of a deal can bring negotiations to a standstill. When this type of conflict occurs — as in the case of Elon Musk and Twitter — it can explode, consuming the time, attention, and resources of the organizations and individuals involved. Successful leaders need to know when to negotiate, when to assert themselves, and when to leave.
The ideal scenario
When a deal is still in the ideation phase, it can be easy to visualize a path to success. It may be tempting to think that the other side will obviously understand your point of view and there will be no disagreement about the facts, their importance, and their merits. Unfortunately, this is rarely the case in the real world. There will always be disagreements that need to be worked out. If a compromise is possible and both parties come to the table with the same overarching goal, an agreement can usually be reached. These are the circumstances that typically lead to successful mergers and acquisitions, and that’s what every executive hopes for when they first come to the negotiating table.
dealing with SIN
However, when the deal is driven or hindered by stubbornness, irrationality, or narcissism (the three cardinal sins of a deal), negotiations can quickly fail. Leaders need to anticipate when this is happening and understand that an agreement under such conditions is unlikely. If they still need the deal, they need to develop a strategy that takes these personality issues into account, rather than just hoping they will go away or get better — because they won’t.
In my own career, I’ve been involved when TD Ameritrade was looking to acquire a technology company. The company in question would not even initiate a discussion because a key person associated with the potential deal had developed a very negative reputation as an unreasonable person. Therefore, rather than involving this person in the negotiations, we struck the deal directly with the representative of one of the large private equity firms behind the tech company. They agreed to sit down with me on the condition that this other person would not be present. In the end we came to an agreement and the takeover was a success. It’s not always possible to sidestep a difficult player, but leaders should always be willing to step back and look for an alternative route to success.
How important is it?
Sometimes, as was the case with TD Ameritrade and the tech company, closing the deal is very important and you can find a way to overcome difficulties. In fact, when the stakes are very high, walking away because someone is stubborn or acting out of ego may not be an option. But leaders need to pay attention and understand exactly why a business is important and how much they are willing to give up for it. It is important not to get caught up in the negotiations for their own sake and consequently be tricked into closing a deal on disadvantageous terms, because after all, when the deal is closed, you have to deliver.
when to go away
No matter how important you find a particular negotiation, you cannot afford to make a deal that will ultimately harm you. Someone may be pushing you in a certain area, such as B. Finance, but if you know it’s going to weigh more on you in three years, then it’s not worth pursuing the deal. Always remember what you want out of a deal. If it doesn’t achieve these goals at a reasonable cost, then why should you? Always think about whether the other party is a person you even want to work with.
There is no perfect formula for closing a deal. Leaders should work to develop strong listening skills so they can better distinguish between a misunderstanding and a serious impediment to closure. Understanding how the other party thinks, what the sins are at play, and having clear goals and a sense of how much you are willing to give up can help you understand when to fight for the deal and when to walk away.
Share your deal experiences with me on Twitter @CoachJoeMoglia.