But don’t underestimate diplomacy. After all, it is an art to create and manage relationships among nations. Especially nowadays, when you experience a lot of nationalism and polemic speech in and between countries. When taking a closer look at the work of diplomats, we can find some interesting insights that every executive could use in business negotiations as well, especially when they have to create and maintain relationships to other companies. Which, actually, almost all companies have to. But when asked what they want to reach in a negotiation, landing a new contract, or strengthening the relationship with the other company, many negotiators simply want to seal a deal. This mindset is the reason why many deals worldwide fail: they end up in courts, in arbitrations, or in ugly separations.
Maintaining good relationships between companies today is, through internationalization and globalization even harder. To be successful, you have to be able to understand and manage some principles - which diplomats and international negotiators integrate in their day to day work:
The classic diplomacy theory, which is the foundation of modern diplomacy, stresses the necessity of continuous negotiation between states by appointing permanent representatives in other countries and the maintenance of an ongoing communication. And as in negotiations between states, in organizations negotiations should continue after the parties signed a contract. The latter represents only a will of working together on a piece of paper, which could be enforceable in front of a court. A relationship is more than that, it’s a connection between two parties, with an implicit and complex set of interactions, ideally on the basis of mutual trust and respect. A contract could never grasp the sense of a business relationship, no matter how detailed.
But be aware not no underestimate to role of a detailed documented agreement. Most contracts include only the main parameters and fulfill legal requirements. We strongly advise our clients to be very specific on what things they document. Especially when there is potential mistrust between the parties, or if one party has specific doubts that the counterpart could fulfill some aspects of the deal, you should note these concerns in the documentation. This information is of high value for the people responsible for the implementation of the deal.
A business deal of any significant duration is a continuing negotiation between parties, who must apply their agreement to unforeseen circumstances and adjust their relationship to a constantly changing environment. You negotiate a deal with your counterpart taking into account the current (market) circumstances. But in a dynamic, fast paced world these realities can change quickly. Therefore it is crucial to discuss what both parties would like to do, if any parameter of the deal changes in future. It is also strongly advisable to agree on packages, like „If A happens, then X will apply“ and „If B happens, Y will apply“. There is no negotiation that will achieve perfect understanding. This applies especially when both parties have a different cultural background, or if they belong to different industries with particular dynamics and rules. This is why you should not focus only on the contractual aspects of a deal, but also on the relational factors. Otherwise you might neglect sources of disagreement and conflict, other business opportunities, and unpredictable events would endanger your deals. Signing a deal contract as solely goal could be appropriate only for a one-time interaction between both negotiation partners, with no special relationship as foundation. In a nutshell: always include relational aspects into your contract/agreement, to be safe even months after the deal is sealed.
Diplomats (and negotiators) should think - before and after the signing of a contract - relationally about the transaction, developing strategies and deploying resources to facilitate their continuing negotiation. Even if you are a Dealmaker (responsible only for closing a deal), stay close to the Realmaker (responsible for the implementation) and advise them. Furthermore, both parties should agree at the end of the negotiation process to regularly review together the progress, instead of assuming those meetings will happen spontaneously.
Diplomats know that the key to successful negotiations and relationship building lies in the harmonization of the interests (truly understanding the concerns and priorities of the other[country]) of all parties at the table. The more you put yourself in the position of your counterpart, the more persuasive your arguments will be. You should verbalize what’s in the other’s mind, rather than in yours. Even if at first glance the positions (of countries or companies) seem unmatchable, you should spend time talking about the wishes behind the position and on harmonizing the interests.
Does it sound implausible? Let’s take a look at an older negotiation, from 1978. That year, Egypt and Israel negotiated together in regards to the Sinai Peninsula. It was occupied by Israel, and Egypt insisted on a full return. Israel insisted on keeping (at least a part of) the peninsula as a buffer zone between both countries. Jimmy Carter managed to facilitate the negotiation and helped Egypt understand the true concern of Israel: the security aspect, rather than the possession of the land. When understanding was achieved, both countries agreed to several measures, giving Israel enough security and returning the majority of the land to Egypt.
If you want to reach a difficult agreement, in diplomacy or in business, you have to know and understand the stakeholder environment of your counterpart, as well as the specific dynamics between them. As in every state or political party, you have coalitions, alliances, animosities, and hostility in organizations.
Let’s assume that you finally reached with your counterpart a preliminary deal. He made concessions as far as he could. But you know that he needs know the approval of two specific business unit leaders in his company, Smith and Johnson. It could happen, that your counterpart comes back to you after several days, letting you know that he got no approval. How could this happen? Maybe you didn't prepare accordingly and find out that there is a huge hostility between both, and if Smith agrees to the deal, Johnson would disagree for sure (and vice versa). With this information in the forefront of the deal sealing, you could have sent two people to Smith and Johnson in parallel to get their approval.
A deep understanding of the „stakeholders eco system“ in your counterpart’s organization helps you achieve the desired outcomes.
Diplomats are well aware that creating and maintaining relationships with other countries are time consuming, especially when there is a conflictual situation. These processes usually take longer than initially planned. Many business executives show a greater level of impatience in negotiation. Time is money, the value is clear for them, the agreement shall be reached fast. Efficiency is important, but it can backfire in negotiations, if you don’t take time enough for different stages. For example, if you are negotiating with an Asian company, it is impolite and rude to skip the rapport phase and to cut the personal interaction to a minimum. You should never skip that phase, if you don’t want to risk an undercapitalized deal. Not in the sake of efficiency, nor for other reasons. It is crucial for building a relationship.
When I first negotiated with Croatians, I learned that these highly professional business people need to trust you first, before making a deal with you. Trust in the negotiation counterpart is more important for most Croatians than the „sum on the table“.
A complex negotiation requires time, so don’t rush through. You’ll need time to truly understand your counterpart. An agreement that is negotiated in a rush is more likely to be renegotiated or that one of the parties may pursue litigation. Both are costly outcomes. A greater time investment before and after the interaction will help you avoid an even greater investment afterward. The same advice applies if you fall back during the process. Imagine you are already talking about creative solutions with your counterpart, but suddenly he makes a new request. Most negotiators are then filled with indignation by his behavior. But what truly happened is, that you felt two steps back in the process. So, try to understand his statement, keep calm, and restart the process.
De Callière (1) used a nice metaphor: [„A negotiator] must behave as a good clock maker would when has clock has gone out of order; he must labor to remove the difficulty, or at all events to circumvent its results with a patience which no trial can break down“(2).
Diplomats learn two important lessons: a) study hard and explore every dimension of the countries, companies, and people you get in touch with. And b) they are acting as agents for their governments, so they have to know as many thoughts/positions of their „boss“ (country/ministry) as possible regarding current issues. These two lessons are mandatory for every business negotiator as well. Many executives fail to reach mutual gains agreements, or claim a fair share of the value for themselves, because they don’t prepare themselves responsively.
Maybe you follow an “Let’s hear what they have to say and then we will decide how to deal with them“approach. If you do so, be aware that this is one of the worst possible attitudes. It’s like inviting them to the battlefield, watching what they throw on you and then deciding how to react. If your counterpart is well prepared, it’s highly likely that you’ll be caught by surprise. If the preparation is really good, your first thought will be that there’s no deal possible and you’ll feel the impulse to flee.
Therefore prepare thoroughly for every negotiation! Preparation doesn’t mean only preparing the facts. Bringing your own Excel file to the table and stating that „That’s the only truth possible“ won’t help you much. You have to prepare on the process itself, as well as on your counterpart. You not only need to understand the essence of the transaction, but also exhaustively research the countries, organizations, cultures , and individuals involved. But preparation means also gathering information from your own company and of your own boss.
“While flexibility and openness are certainly useful in any negotiation, they are no substitute for systematic preparation“(3).
There is a popular misconception in the business world, that the best negotiators are persuasive communicators, true masters in talking. The reality is different. If you want to truly succeed, you have to be a good listener. There’s no other way. This principle applies to both diplomats and business negotiators. Successful negotiation requires vigilance about your own words and behavior as well as keen observation of the other party.
All the above aspects are part of a good preparation. If you truly prepare for the process, you have to sit down and think about which messages are crucial and have to be understood from the counterpart in every step of the process. If you know that your relationship with your negotiation partner is difficult, or even toxic, you can train not to overreact emotionally when the other party is trying to attack you. In coaching and workshops you can prepare yourself to be better aware of your own body language and to be sensitive to the body signals of your counterpart.
Your ability to understand and harmonize interests depends mainly on your perception skills. When sitting at the negotiation table, you will be confronted with numerous viewpoints, perspectives, subjective interpretations and arguments. If you are not so experienced in negotiation, you can use the following mental scene recommended by Prof. Salacuse (4). Imagine yourself sitting in the direction room of a television show, having three screens in front of you. One screen shows only the words and actions of your counterpart, the second screen is focused on your own words and actions, and the third screen shows the effects of your own words and actions on your opponent. Like a television director, you have to constantly process information from each screen before you decide what to do or to say next.
Respect is a mandatory norm of international diplomacy. Even in the early days of diplomacy, people were trained to respect the traditions, customs, and habits of others. In the modern world, lack of respect is the reason for many failed negotiations (5). The world of diplomacy is full of formalities, rituals, and rules which have one goal: to acknowledge another country’s sovereign status. The implementation of rituals can help in negotiations in signaling effectively respect for the involved parties. Sounds difficult? It isn’t. Let’s assume that you are searching for a cooperation with another company, which is much smaller in numbers than you are. And you are well aware that this might lead to your counterpart feeling they are in a weaker position. Well aware about its current status, your counterpart might have concerns that this imbalance might play a role in the future cooperation too. To invalidate these concerns, you can structure all aspects of the negotiation as an encounter between to equal states. Arrange a renegotiation dinner, set the agenda early before the negotiation (together with your counterpart), designate chairmen and so forth. If it’s an important deal for both partners, you can even prepare delegations visiting each other’s companies before the formal negotiation starts. Don’t stick only to verbal respect, show respect through your actions. And be particularly aware of the importance of respect when you are faced with cross-cultural negotiations.
(1) French diplomat in the court of Louis XIV, author of the first practical manual of modern diplomacy “On the manner of negotiating with princes“
(2) PON Negotiation Journal, Volume 7, Number 3, March 2004, page 5.
(3) Salacuse in PON Negotiation Journal, Volume 7, Number 3, March 2004, page 5.
(4) Profesor of Law at the Fletcher School of Law & Diplomacy at Tufts University, source: PON Negotiation Journal, Vol. 7, Nr. 3, March 2004, p 6.
(5) i.e. GE’s failure to secure the European Commission’s approval for the purchase of Honeywel International l in the year 2001. GE was so sure about the success of the deal, that they paid little attention to the European Commission. Furthermore GE’s CEO approached the EU competition commissioner as if it was a private negotiation. But it wasn’t, and the commissioner knew there is a lot of public attention on him, on the EU and on the deal.