The power of relationships in negotiations: Maximizing value vs. comfort

Any good relationship is built on trust, understanding, and respect. People’s desire to feel good about themselves, and their concerns for what other people will think of them, can often make them more sensitive to the counterparty’s interests during negotiations. Who doesn’t want to be liked? The objective of any commercial negotiations is to maximize the value that you secure. But how does having a good relationship impact the outcome of the negotiation? By understanding the true dynamic of the relationship, and how to properly leverage it, the outcome of the negotiation can be fruitful.

I recently had a coaching session with a delegate from a workshop that I facilitated a several months ago. The session was focused around a multi-million-dollar negotiation the delegate was leading along with other stakeholders within the organization. As we dug deeper into the scenario, he shared that one of the stakeholders that was part of the negotiation, adding technical insights, was a former employee of the supplier that they were negotiating with. In addition, the stakeholder still had a “good” relationship with the supplier. The stakeholder was also having conversations with the supplier about specs of the project being negotiated undenounced to the delegate leading the negotiation. As a result, the delegate felt that he was not able to maximize the deal.

Can a “good” relationship with the counter party impede your ability to maximize the value of a negotiation? YES! Often when there is a good working relationship between parties in a negotiation, it’s viewed as a positive. The parties involved feel as if they can share information and act in collaborative manner to come to a resolution. However, this perception of a good relationship can lull the parties into a sense of comfort. Comfort is often a major reason why a party does not maximize value in negotiations and hinder the ability to drive for more value from the counterparty. When there is a sense of comfort, there is no desire or interest to continue to drive for value beyond a place that is agreeable to all parties. Hence, there is no desire or interest to maximize the deal, and to do so would be uncomfortable.?

Another by-product of being comfortable in a “good” relationship, is often the unwillingness to explore options. The exploration of as many options and ideas in negotiations can often create significant value for all parties involved. However, when there is a sense of familiarity and comfort as a function of having a good relationship with the counterparty, the incentive to explore options is significantly diminished, or even eliminated. Why put in the extra effort and step out of your comfort zone and push for more value when the terms of the deal are agreeable?

Although a good relationship with the counterparty can be detrimental in negotiations, it can also be a key factor in maximizing the value of the deal. One of the key pillars of a good relationship is communication, and this same ideology can be leveraged in negotiations. It is imperative that you not only understand the key issues of the other party, but to also understand how they rank the issues.?

Conversely, it’s equally important that the other party understands the same of you. Once the issue and prioritization of the issue are shared, both parties can trade consessions to capture value to maximize the deal. As a result, the relationship between the parties can be leveraged to make it more amicable to trade concession, rather than being used to make the parties feel reluctant to try the maximize the value that they’re trying to capture. This will also enable the relationship between the parties to stay intact.?

People often tell me that they are hesitant to try to capture incremental value in negotiations because they feel it would have negative consequences to the relationship. However, by understanding the priorities of the other party and trading concession, the impact of the relationship is rarely impacted in a negative fashion. It is indeed possible to be warm with the people, but firm on the issues/variables that are being negotiated.

There is no doubt that having a (good) relationship with the counterparty can lead to either a positive or negative experience. However, there a couple of key takeaways to consider when going into a negotiation when there is a good relationship intact.

1. Understand that your loyalty is to your stakeholders, and not to the preservation of your relationship with the counterparty. Now, that’s not to say that you should disregard the importance and value of the relationship. Dependent upon the type of negotiation you’re in, a cordial and collaborative relationship may be appropriate, thus important to maintain. However, the relationship between you and the counterparty should not impede your effort in maximizing the deal.?

2. Internal alignment is crucial in negotiations where strong relationships are in place. Making sure that?all?stakeholders understand the direction and plan of the negation is key. This also includes clarity on lines of communication. Who will communicate with the counterparty? How and at what frequency will the communication take place? Having internal alignment, and a clear outline of how communication will work will help to eliminate situations like the one outlined by the delegate during my coaching call.

Relationships are an inherent part of any negotiation. However, to maximize deals it’s imperative to have a clear understanding of how your relationship with the counterparty impacts your decision making and your desire to maintain your comfort. Moving forward, the question you should ask yourself is, do you have the mindset of getting the deal done OR maximizing the value the other party can give you??