The Idea in Brief
Why do so many deals that looked great on paper end up in tatters? Negotiators on both sides probably focused too much on closing the deals and squeezing the best terms out of one another--and not enough on implementation. Bargainers with this deal-maker mind-set never ask how--or whether--their agreement will work in practice. Once implementation begins, surprises and disappointments crop up--often torpedoing the deal.
How to avoid this scenario? Bargain using an implementation mind-set. Define negotiation not as closing the deal but as setting the stage for a successful long-term relationship. Brainstorm and discuss problems you might encounter 12 months down the road. Help the other party think through the agreement's practical implications, so your counterparts won't promise something they can't deliver. Ensure that both sides' stakeholders support the deal. And communicate a consistent message about the deal's terms and spirit to both parties' implementation teams.
Deals negotiated from an implementation mind-set don't "sizzle" like those struck by bargainers practicing brinksmanship. But as companies like HP Services and Procter & Gamble have discovered, a deal's real value comes not from a signature on a document but from the real work performed long after the ink has dried.
The Idea in Practice
To adopt an implementation mind-set, apply these practices before inking a deal:
Start with the End in Mind
Imagine that it's a year into implementation of your deal. Ask:
Is the deal working? What metrics are you using to measure its success?
What has gone wrong so far? What have you done to put things back on course? What signals suggest trouble ahead?
What capabilities are needed to accomplish the deal's objectives? What skills do your implementation teams need? Who has tried to block implementation, and how have you responded?
By answering these questions now, you avoid being blindsided by surprises during implementation.
Help the Other Party Prepare
Coming to the table prepared to negotiate a workable deal isn't enough--your counterpart must also prepare. Before negotiations begin, encourage the other party to consult with their internal stakeholders throughout the bargaining process. Explain who you think the key players are, who should be involved early on, and what key questions about implementation you're asking yourself.
Treat Alignment as a Shared Responsibility
Jointly address how you'll build broad support for the deal's implementation. Identify both parties' stakeholders--those who will make decisions, affect the deal's success through action or inaction, hold critical budgets, or possess crucial information. Map how and when different stakeholders' input will be solicited. Ask who needs to know what in order to support the deal and carry out their part of its implementation.
Send One Message
Ensure that each team responsible for implementing the deal understands what the agreement is meant to accomplish. Communicate one message to them about the terms of the deal, the spirit in which it was negotiated, and the trade-offs that were made to craft the final contract.
During IBM Global Services' "joint handoff meetings," the company's negotiators and their counterparts brief implementation teams on what's in the contract, what's different or nonstandard, and what the deal's ultimate intent is.
Manage Negotiation Like a Business Process
Establish a disciplined process for negotiation preparation in your company. Provide training in collaborative negotiation tools and techniques for negotiators and implementers. Use post-negotiation reviews to capture learning. And reward individuals for the delivered success of the deals they negotiated--not for how those deals look on paper.
Copyright 2004 Harvard Business School Publishing Corporation. All rights reserved.
- Purchase the full-length Harvard Business Review article here.
- Visit Harvard Business Online.
- See more on Strategy and Execution at Harvard Business Online.
Harvard Business Review
by Geoffrey Cullinan, Jean-Marc Le Roux, and Rolf-Magnus Weddigen
This article emphasizes the importance of an implementation mind-set during mergers and acquisitions. In the realm of M&A, deal making is glamorous. Crafting agreements with implementation in mind is not. For that reason, too many negotiators get "deal fever." Rather than using due diligence to analyze the deal's strategic logic and the acquirer's ability to realize value from the agreement, they use it to justify the financial viability of their prospective acquisition.
The authors suggest ways in which companies can improve their due diligence capabilities. In particular, effective due diligence requires answering four basic questions: 1) What are we really buying? 2) What is the target's stand-alone value? 3) Where are the synergies--and the potential pitfalls? 4) What's our walk-away price? Answering these questions will affirm--or quash--the strategic rationale for a prospective acquisition.
Harvard Business Review
by Danny Ertel
Ertel sheds additional light on the concept of managing negotiation like a business process. Four practices can help ensure that deals conducted by your company collectively make--not break--your firm's bottom line:
1) Create a negotiation infrastructure. Provide all negotiators with information on past and current deals, and clarify each agreement's connection to corporate priorities. 2) Broaden your measures of success. Evaluate deals not just by their financial merits but also by how well they improve communication with suppliers, stimulate fresher solutions, and generate more workable commitments. Link those measures to negotiators' incentives. 3) Distinguish between the deal and the relationship. Agree not to resolve deal-related issues, such as conflicts over pricing, by exacting concessions that would erode trust and mutual respect. 4) Learn to walk away from a deal. Define your BATNA--your best alternatives to a negotiated agreement--before the bargaining begins. Then evaluate proposed agreements against your BATNA. If your BATNA is better than any offering put on the table, walk away.