(By Keld Jensen)
“The Rules of the Game dictates how parties are going to negotiate. They must be articulated and agreed to before any conversation takes places regarding the merits of the matter to be decided or the deal to be made. Who are the teams? What are the rules of play and the conditions for termination? This process can be time consuming – in fact it can sometimes take more time than the actual negotiation. But establishing the ground rules prior to commencement of the bargaining saves a lot of time down the road, avoids misunderstandings, and enhances the prospects for cooperation.“
Imagine you are about to compete in a tennis match. You have your racquet and are looking forward to a good match. You are tremendously surprised when you arrive at the court and your counterpart has set up two chairs and a table on the side. On the table is a chess board, stocked with knights, rooks, and pawns. He looks expectantly at you and asks, “Are you ready to play?”
This scenario plays out every day in millions of cases worldwide. Not with a tennis racquet and a chessboard, but in a negotiation. One side comes to the table with an understanding of the rules of play and their opponent arrives with a completely different set of assumptions. Many of my clients over the years have been amazed when I open with the question: Shall we talk about how we are going to negotiate? We have to define the Rules of the Game before we can begin.
The Rules of the Game dictates how parties are going to negotiate. They must be articulated and agreed to before any conversation takes places regarding the merits of the matter to be decided or the deal to be made. Who are the teams? What are the rules of play and the conditions for termination? This process can be time consuming – in fact it can sometimes take more time than the actual negotiation. But establishing the ground rules prior to commencement of the bargaining saves a lot of time down the road, avoids misunderstandings, and enhances the prospects for cooperation.
Earlier in my career I remember receiving a call from one of my most important customers. He wanted to check a number of details concerning the forecast for the following year. The customer was the head of production, so I had expected the conversation to be about technical details. This typically occurred every year around the same time, yet this time was different. It turned out he wanted to discuss terms, delivery, and financing. He also had other executive team members on the call. I wasn’t prepared and ended up entering into an uncomfortable agreement.
I was angry. I was ambushed! There was no way I could have known that the production manager wanted to discuss terms, delivery, and financing with me. He normally never does that until the end of the year.
What I later came to realize is that I should have started the discussion by asking, “What are we going to talk about, and who will be at the meeting?” If I had done this, I would have been prepared. If I was not ready to negotiate, I could have asked for more time. Time is negotiable – we could have scheduled a follow-up call for the next day after I had time to review the facts.
This was a priceless lesson for me; one that I’ve shared in countless seminars and will discuss at this year’s Global Summit on Negotiation & Trust. Andre Bisasor, the conference chairman, agrees on its importance saying, “Establishing the ground rules for negotiation is a critical step in setting the stage for a successful negotiation. Because negotiation standards might differ from person to person or from organization to organization, it is of paramount importance that the negotiators setup a common framework, especially when there are differences in culture at play.”
In some negotiations, establishing common rules may be as simple as asking the question in the prior example. For more complex situations, it goes further to include an agreed upon agenda, the selection of a negotiation strategy, and agreement on the Code of Conduct. Questions to be addressed include:
- Who will open first for the exchange of information?
- How do we establish trust? Cooperation?
- How do you present all variables? Who lists them?
- Who will take care of the whiteboard and visual aids?
- Must breaks be agreed to and when should they be?
- Do all delegates have the authority to conclude? And if so, what is their mandate?
According to studies by Copenhagen Business School, negotiators are forfeiting as much as 42% of the value of a transaction due to failure to bargain for hidden variables. Due to lack of trust, information, and cooperation, discussions are often limited to just price and quantity and both parties miss opportunities to create value. There is no framework for these developing these components! By defining the Rules of the Game, you create a better playing field for discussions to take place and optimize your chances for a winning result.