Negotiating is a big part of running a business. When it goes well, both parties agree on the facts and work together to reach terms or compromises. The outcome in these cases should benefit everyone in some meaningful way. All too often, however, negotiations break down, either because of SIN — stubbornness, irrationality or narcissism. Ego, disagreements about basic facts, or a failure to see eye-to-eye about the reasons and benefits of getting a deal done can all bring negotiations grinding to a halt. When that sort of conflict occurs — as it has in the case of Elon Musk and Twitter — it can blow up, sapping time, attention and resources from the organizations and individuals involved. Successful executives need to know when to negotiate, when to stand their ground, and when to walk away.
The Ideal Scenario
When a deal is just at the idea stage, it can be easy to visualize a pathway to success. It may be tempting to believe the other side will obviously see your point of view, and there will be no disagreement about the facts, their meaning and their merits. Unfortunately, in the real world, this is rarely the case. There will always be disagreements that must be worked through. If compromise is possible, and if both parties approach the table with the same overarching goal, an agreement can usually be reached. These are the types of circumstances which typically lead to successful corporate mergers and acquisitions, and they’re what every executive hopes for when they first arrive at the negotiating table.
Dealing With SIN
However, if the deal is being driven or impeded by stubbornness, irrationality or narcissism (the three cardinal SINs of doing a deal), negotiations can quickly break down. Executives need to recognize early on when this is happening and be clear-eyed about the fact that an agreement is unlikely to be reached under such conditions. If they need the deal to happen anyway, then they need to develop a strategy that takes into account these personality issues, rather than simply hoping they’ll go away or get better — because they won’t.
In my own career, I dealt with this when TD Ameritrade wanted to acquire a tech company. The company in question would not even initiate a discussion because a key individual associated with the potential deal had developed a very negative reputation as an unreasonable person to deal with. Consequently, rather than involve this individual in the negotiation, we did the deal directly with the representative of one of the major private equity firms behind the tech company. They agreed to sit down with me, on the condition that this other individual would not be present. In the end, we came to terms, and the acquisition was a success. It’s not always possible to work around a difficult player, but leaders should always be willing to take a step back and look for an alternative pathway to success.
How Important Is It?
Sometimes, as was the case with TD Ameritrade and the tech company, it’s very important to get the deal done, and you can find a way to work through difficulties. Indeed, when the stakes are very high, walking away because someone is being stubborn or acting out of ego may not be an option. But leaders need to be careful about this and must understand exactly why a deal is important and how much they’re willing to give up in order to make it happen. It’s important not to get wrapped up in the negotiations for their own sake and consequently be sucked into completing a deal under disadvantageous terms, because ultimately, once the deal is consummated, then you’ve got to deliver.
When To Walk Away
Regardless of how important you may feel a particular negotiation is, you can’t allow yourself to do a deal that ultimately is going to harm you down the road. Somebody may push you in a particular area, such as finances, but if you know that three years from now it’s going to be more weight on you, then the deal isn’t worth pursuing. Always keep in mind what you want to get out of a deal. If it doesn’t achieve those goals at a tolerable cost, then why would you want to do it? Always think about whether the other party is a person you’d even want to work with.
There’s no perfect formula to getting a deal done. Executives should work to develop strong listening skills so they can better tell the difference between a misunderstanding and a serious impediment to the deal. Understanding how the other party thinks, what SINs may be involved, and having clear goals and a sense of how much you’re willing to give up can help you understand when to fight for the deal and when to walk away.
Share your deal-making experiences with me on Twitter @CoachJoeMoglia.