Posts Tagged ‘Dealmaking’

The Case for Going Beyond Dealmaking

Monday, January 10th, 2011

I am often asked why I differentiate relationship negotiation from dealmaking. After all, isn’t “deal” just another word for “transaction”? The answer is yes, and therein lies the central in traditional deal-based negotiation.

A transaction is a quick, short-lived exchange. It’s about this deal, these terms. Get a signature, and you’re done. Negotiating relationships is a process with no clear beginning or end. Your goal is to build sufficient understanding, comfort and trust between parties that you can work together now and in the future, under conditions that enable both sides to prosper.

There are other critical differences:

  • In a deal, the party you are negotiating with is, to a large extent, your opponent. In a relationship, the other party is your preferred partner.
  • Deals are about getting as much of what you want as you can carry away. Relationships are based on fair division and joint burden-sharing.
  • In a deal, you hold yourself aloof from the other party: hiding information, guarding your responses, pressing your position. In a relationship, you are more relaxed, open, and natural: sharing information and truly seeking to understand and resolve differences.
  • In a deal, you may exaggerate the strength of your position or try to trick the other side into giving in. Successful relationships are based on honesty, reliability, and follow-through.
  • Deals are static, inflexible, with exhaustive contracts intended to guarantee that every term and condition will remain “carved in stone” until the transaction is completed. Relationships are also based on fundamental agreements, but they are more accommodating, less rigidly detailed. Because relationships take place over time, change needs to be anticipated and managed constructively rather than ignored because it falls outside of the scope of the initial agreement. Relationships are dynamic, not carved in stone.

Not all deals require relationships in order to succeed, of course. When you sell your old car through an online ad or bargain over a ceramic pot in a foreign market while on vacation, it truly is a transactional activity. But most negotiations—from mergers and acquisitions, to supplier contracts, to interdepartmental meetings for allocating funding or agreeing on where to hold the company picnic—are for arrangements that will be implemented over time, sometimes years, or that will lead to future arrangements. Even when you are unlikely to meet that individual customer or supplier or even colleague ever again, the relationships you build throughout the negotiation and implementation process will have an impact on your future business by shaping your reputation and the number and type of references you receive.

Building and maintaining relationships involves a lot more work than simple dealmaking, in which you can be detached, no-nonsense, and unaffected by what comes after. But over time, living off single transactions is downright exhausting and offers ever-diminishing returns. In the long run, you will find that the extra work you put into negotiating relationships will more than pay for itself in tangible gains—and will reward you with a happier life.

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