Back off, bud: Better a bad day than a bad deal

Business

Back off, bud: Better a bad day than a bad deal

Bullies, liars, charmers and other villains are all to be found at the negotiation table ... know when to say no

Mark Barnes

The right outcome for a negotiation isn’t always (A+B)/2, where one side’s starting point is A and the other side is B. It is more complex than that, and it’s not only about the numbers.
Some of the most well-meant and strategically obvious mergers and acquisitions fail shortly after the deal is done because the right initial deal wasn’t done. If the objective merger ratio of the two companies’ shares should have been 70:30 and the deal was done instead at 30:70, it won’t work. Although it seems that we have an outright winner and loser, the real issue is that you have created a toxic mixture which gets found out in short order.
Sure, someone got outsmarted, misled, beguiled, whatever … in the negotiation process, but finding the middle ground where value is created is not about winning or losing, it’s about common ground.
The little bit I’ve learned about negotiation hasn’t come from textbooks or guidance as much as it has come from mistakes – as a winner and as a loser.Draw a Venn diagram in advance and define the intersection between the two independent circles. Agree that, before negotiations start. A perfect overlap just defines two competitors and suggests only a full takeover – to rationalise, if the regulatory environment permits it. Barely touching edges means that there’s nothing in common.
If a deal doesn’t come together at least somewhat naturally (including the personalities and principles of the players on both sides) then it is unlikely to gather sufficient momentum to conclude on the right terms, without force or submission.
At the centre of all well-founded deals is the knowledge and understanding of the truth. Deals, in and of themselves, might appear to make instant money but the purpose is actually to create enduring value.
If there is only so much money available, it is folly to pursue more. At some point the marginal destructive consequence of additional debt weighs too heavily on the sense of the deal.Tell the truth. It requires mutual trust between both parties, which is a risk, but without it valid founding judgments and any future projections aren’t possible. Truth in any case emerges over time; everybody knows that. The deferred consequence of the initial lie will always be far worse than the small upfront adjustment usually required to match truth with truth.
The personalities at the negotiating table can often have more influence on the outcome than the numbers. Emotions run high in negotiations, not only when a solution seems elusive but also when it seems ever so close.
Bullies, liars, outright charmers and other villains are all to be found at the negotiation table. These characters are obvious and easy to deal with once their colours are exposed.
More difficult to work out is what the other side really wants, other than just “more”. Many an unnecessary fight or failure has been over nothing more than a misunderstanding of the other side’s mandate. Money isn’t always the final arbiter and often too much money is put on the table to wash over a misunderstanding which it can’t solve – a waste of negotiating currency that is better spent to discover and engage on the real issue. Ego comes at a price, particularly if you try and settle it bluntly, with cash.Don’t rush. Extended negotiations can also cause damage and cost money, but rushing is worse.
If you can’t get to the answer, stop trying. The pre-deal boundaries, confirmed in the mandate and usually found in sensible debate, in a structured boardroom/shareholder environment, with full information, are best adhered to in the absence of new information.
Know when to say no, and when you get to that point, say no and mean it. As they say in this game – better a bad day than a bad deal.
It is often said that that you can’t unscramble the eggs. In the world of business and contract, sometimes you can and should. If it becomes clear that a negotiated result, even one reached with the utmost integrity, is demonstrably wrong in its practical application or simply not fair – undo it, change it, save it. If you don’t, the best people will leave – the very people required to carry that same deal onto the real battlefield of the competitive operating environment.
All good deals are fair. If not, both sides will eventually lose, and the end of the strike won’t be replaced with the productivity required that makes the extra costs work.
Mark Barnes is CEO of the Post Office.

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