Bad Negotiations Shouldn’t Sink Your Business Relationships

Companies's failure based on ineffective relationships due to poor communications and ineffective negotiation is completely avoidable.

When business relationships flounder, a common result is lost value, time and resources. Such undesirable results are best avoided through strong relationships built with effective negotiating skills.

In the recently published “Entrepreneurial Negotiation,” authors Samuel Dinnar and Lawrence Susskind draw on their years of experience to highlight the critical importance of  effective communication and negotiation skills in the entrepreneurial setting.

Some general lessons of the book are applicable not only to entrepreneurs but to others as well.  Indeed, in today’s innovation economy, just about every business needs to bring an entrepreneurial mindset to creating disruption or risk being disrupted itself.  A business that waits to address issues only after a crisis erupts surely risks a loss of value, increased expense and reduced options for possible solutions.

Because opportunities and threats present themselves quickly, skilled negotiation is essential to minimizing harm while maximizing the chance for success.  This core message is nicely summarized in the book, which is briefly discussed below. Well documented agreements are the natural complement of effective negotiations—offering parties a framework for their relationship and a launching pad to discuss possible alternations that may be desirable in the future.

Entrepreneurial Negotiation

Last fall, the daily blog of the Program on Negotiation at Harvard Law School announced the publication of “Entrepreneurial Negotiation” in a post entitled “Most Startups Fail, But Yours Doesn’t Have To.” The post highlighted why entrepreneurs fumble key negotiations and, importantly, identified the opportunity to take steps to improve negotiation outcomes.

Those topics are explored in great length in the book, which starts with a hypothetical story of a company’s growth emphasizing key points of negotiation with various parties along the way.  After painting a scenario involving poor negotiation skills and an unhappy ending, the authors suggest how improved negotiation skills could have led to an improved alternative ending. The book then moves into a discussion of key components of the entrepreneurial world and common scenarios requiring entrepreneurs to negotiate.

The centerpiece of the book consists of stories shared by entrepreneurs who, in moments of brutal honesty, reflect on their real-life experiences and lessons learned.  These stories are supplemented by video interviews made available to readers in the website associated with the book.  In an article appearing in the October 2018 edition of Negotiation Journal entitled “In Practice:  The Eight Big Negotiation Mistakes that Entrepreneurs Make” the authors summarize the mistakes as:

Entrepreneurs Are Self-Centered

Entrepreneurs Are Overly Optimistic and Overconfident

Entrepreneurs Need to Win – Now

Entrepreneurs Are Too Quick to Compromise

Entrepreneurs Work Alone

Entrepreneurs Haggle

Entrepreneurs Rely Too Heavily on Their Intuition

Entrepreneurs Deny Their Emotions

Clearly, some entrepreneurs exhibiting behaviors described above have nevertheless created enormously successful companies. Less well known, however, are the many emerging companies that cratered and burned due to some dysfunctional relationship rooted in one (or more) of the factors. The United States Bankruptcy Courts are littered with the carcasses of such entities—with many others put down outside of court without so much as a formal bankruptcy burial.

Documentation Matters

A natural complement to effective negotiation is a well-crafted written agreement. Indeed, negotiations offer take place in the context of preparing documentation.  In addition, it is not unusual for parties to consider possible amendments to a deal against the backdrop of an existing agreement.

Mutually agreeable legal documentation should reflect the understandings, responsibilities and obligations of the parties. Unfortunately, documentation sometimes receives short shrift—with some parties opting to “paper” an understanding with a form from a prior deal or something found on the internet—if opting to put anything in writing at all.  Lawyers can be viewed as obstructionist and expensive (among other things). Unfortunately, some fall exactly into those undesirable categories.  For that reason, it is essential to establish an effective relationship with a business lawyer who understands the business objectives and can produce documentation that will actually be of benefit in framing and guiding a relationship.