China negotiations and SMART goals

One of the keys to successful negotiation is developing a solid set of goals. This is particularly true when you are conducting one of your first negotiations in China, because so many of the variables are unknown and the counter-parties are unfamiliar. If you are going over the bridge to negotiate your thousandth deal in Hoboken, then you probably don’t have to worry so much about articulating your goals in minute detail. But if you are entering a business arena where you don’t know the laws, customs or competitors then it pays to invest the time in some solid research and develop a systematic goal system. Be SMART when it comes to goal setting in China.

Smart goals.

SMART is an acronym as well as a description:

Specific, Measurable, Actionable, Realistic and Timely (or Time Bound)

Everyone agrees with the idea, but putting them into practice in real negotiating situations is hard. Why? Because to come up with SMART goals you have to know exactly what you want, what the other side can deliver, and what the environment is really like. That takes work, research and discipline. It’s much easier to ‘play it by ear’ and hope for the best – but it won’t yield you the same caliber of results.

What are SMART goals?

Specific – Who, What, Where, When, Why & How. Anticipate as wide a range of questions as possible. You may not know the answers yet – but you should at least know what the variables are. Who are you selling to? What are you selling? What does your competitive environment look like? You get the idea.

Measurable – First decide how you will measure success. Profit is the first answer most people come up with, but unfortunately it is not always the best. By the time you know your profit or loss figure it’s probably pretty late in the game. Existing companies with years of history can and should use sales, expenses and profit as part of their goal system. Start-ups, however, could be months away from their first transaction. You need to think of some solid success factor and KPI (key performance indicators) to measure right off the bat. Hint – expenses are a good one. Selection & recruitment of key managers and staffers is another. Number of sales calls and appointments is sometimes appropriate as well.

Actionable – This is the one that separates plans from dreams. Saying that you want to be the most famous brand in China is nice, but it’s not an action plan. Deciding to invest in online advertising and shooting for a 1.5% response rate from you email campaign is much more actionable. SMART goals translate directly into operational and marketing plans.

Realistic – Lots of old-school sales managers liked to set super-ambitious goals to get their front line people to try harder. Not a great China option. When you set your goals too high all you do is condition your team to fail. If investors are involved, you have to be particularly careful to walk a thin line between optimism and realism. If you tell a backer that you’ll go from 0 to 20 million in sales in Year 1 and only manage 10 million – you might feel justifiable proud of your accomplishment but he’ll just see your 50% shortfall. Your management team may see that as well.

Timely- ‘Someday we’ll be the biggest, most profitable company in China….’ Sounds like a nice wish – and it is. But Someday isn’t on the calendar. You need to ‘chunk’ your plan down to actionable components. An overall goal of US$15 million by the end of year 1 is a good start, but that still leaves you groping in the dark for 11 months or so. Breaking it down to a quarterly or monthly sales plan is better. The best of all is to decompose the entire sales process to an operational process. Month 1 – hire sales manager and develop a manpower plan. Hire and train 10 salesmen. Month 2 – Close 20 sales with an average value of US$250,000. Etc. This kind of goal-setting helps you achieve two things – first it helps you stress test your business plan, and second it enables you to monitor your plan at every stage.

Hypothetical Case:

Let’s look at some typical goals for new business entrants to China. Take a top-down look at a generic business entry case. NewBiz Inc. is a newly formed management consulting firm started by 2 ex-investment bankers who plan on selling their knowledge to Chinese entrepreneurs. The owners – let’s call them Poor and Lee – have to put together a business plan for their new venture, and they wisely decide to start with a basic goal system.

What’s their naïve initial goal? To make a lot of money. To have powerful clients. To penetrate the China market. To get up and running as quickly as possible for the least investment feasible and make lots of sales. To make good connections.

Sound too simplistic? Maybe – but no more than many business plans I’ve seen for new business entrants to China. Poor & Lee will, of course, apply solid SMART planning to their China entry plan.

1 – Specific. Poor & Lee start out with a general, sloppy goal — to build a powerful or successful brand. How do they make that more specific? One good way is focus on product or service. What do they want NewBiz to be – the biggest, the best, the broadest or the most focused? What specific problems will they solve? What will their services be? What is their specialty? What separates them from competitors? The same goes for clients. Poor &Lee must visualize the specific type of clients they are gunning for. Be specific to the point of knowing exactly which specific companies you anticipate working with and how you will pitch your business. I know of one young consulting company that went so far as to publish a list of prospective clients. A bit presumptuous, maybe, but an excellent technique for conveying their specific goals about the client and products that they are preparing for. What if you don’t have all the details? That’s a great sign – it tells you exactly what kind of research and planning you should be devoting your time to.

2 – Measurable. All negotiating goals must include numbers, of course, but the numbers must make sense. This is one of the key variables that separate a wish form a goal. Dollars, time, percentages are all valid. In the early stages, Poor & Lee might be focusing on ‘soft’ goals – like what kinds of contacts they are making, who they will partner with and what their new service offering will include. These aren’t as easy to measure as sales, expenses and net profit – but those metrics won’t be effective for months. New China operations should identify the holes in their planning process and figure out a way to objectively measure the progress needed to fill the gaps.

3 – Actionable. Goals must be both strategic and tactical. What’s your strategy? What will you tactics be? A good goal is a destination, but it must contain within it the germ of a strategy. If your goal is to have a powerful brand, then you have to know what your product stand for. How will you get there? If your plan is for clients – you must be able to answer questions about how you will acquire them, what services they expect and whether you want a few big ones or many small ones. Poor & Lee have to take their broad goals like “powerful brand, important clients, profitable operations’ and translate them into step-by-step operating plans. Powerful brand breaks down into ‘research the market and identify 5 key competitors, 20 potential clients and 3 industry specialties’. Now, it may turn out that they can’t identify any competitors or suitable clients. This is very positive – because now they can attack the question of ‘why is this market so undeveloped?’ It may turn out that there is a huge demand that isn’t being serviced – or that demand isn’t really there at all. If you can’t plot out your next step, then you don’t have a suitable goal.

4 – Realistic – Poor & Lee should determine the short, medium and longer term goals that will combine to form their major goal. Their short tem goals will probably be quite realistic – if a bit limited. But as the time frame extends, their goals become more and more vague and wishful. There’s nothing wrong with ambition – but it must be bound by logic and reason. Entrepreneurs must be able to connect the dots. If Poor & Lee plan on going from 0 sales to market leadership in 5 years then they must formulate a plan that explains where the 30 or 50% YOY growth come from. ‘We’re the best because we’re the best’ is what kids say. Negotiators know their own BATNA and understand the limitations imposed by internal and market factors.

5. Timely or time-bound. Poor & Lee need to articulate where they will be in 6, 18 and 24 moths. An established company may focus on 12, 24, and 60 months. 5 year plans don’t have to be actual blueprints, but they should describe your best-case scenario.

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