Jumping through hoops in the dark.

Negotiators often use the analogy of ‘jumping through hoops’ to describe the steps needed to reach an agreement. That’s certainly an apt description for the process of negotiating deals in China — but it’s not necessarily a prescription for success.

    Jumping through a hoop for a pot of gold can make great sense.
    Jumping through a hoop over the edge of a cliff makes less sense.

If you know where you are going to land you can make intelligent, enlightened decisions. But in China Western negotiators often find themselves required to take concrete actions now for an uncertain return at some unknown point in the future.

When you find yourself in a situation where you must jump through hoops in the dark, you are better off negotiating for a flashlight — not the gold. Being able to accurately measure progress is far more valuable than being able to extract vague promises.

    1. Know your goals.
    What’s your goal system? Where do you want to be, and how do you plan on getting there? What’s your counter-party’s goal system? Does it align with yours? Westerners often suffer from tunnel-vision in China. They can’t envision any set of alternatives beyond the ones they have plotted for themselves – often while working with incomplete information in their US corporate headquarters.

    2. Develop independent channels of intelligence
    Do you have adequate information about the process? Is your counter-party your only source of information? If a Chinese counter-party came to the US to negotiate a deal with you and he made it clear that you were his sole source of relevant information, you would be hard-put to disclose details that put your deal in a negative light. Due diligence, after all, is HIS responsibility not yours. This doesn’t make you dishonest or predatory — you are merely acting in your own professional best interest. Well, your Chinese counter-party is no different. Chinese dealmakers may not understand WHY you expect them to guide you through every phase of a negotiation, but they aren’t stupid enough to pass up an advantage.

    3. Negotiate for information about the deal process.
    Too many westerners rely on their Chinese counter-party to decide what will be exchanged for your compromises. The Fog of Business can be a great relationship-building exercise if it is handled properly. If there is an aspect of the negotiation that is unclear, make getting that information part of the process. It’s your responsibility to know what lies beyond the next concession.

    4. Trade real for real.
    Avoid trading real concessions for vague promises. ‘I pay now, you pay later’ is a source of problems — particularly when your payment is denominated in renmenbi and his payment is in the currency of goodwill, relationships, regulatory approval and best effort selling.

    5. You need professional help.
    Build a network of neutral experts — even if you have to pay them. Hiring a lawyer, accountant and relevant consultants before you sign a contract is a lot cheaper than hiring them to get a bad deal back on track. Having an experienced expert at your disposal to act as a sounding board can be some of the best money ever spent in China.

    6. Develop alternatives.
    Alternative deal options and alternative counter-parties. Even when dealing with the Chinese bureaucracy, there are few monopolies on information or approval channels. That may mean setting up shop in a different province or municipality, it may mean finding a new partner or changing the structure of your deal. If you walk into a meeting with a Plan B in place, then you are in a much stronger position.

    7. Strategy first, tactics later.
    Don’t start negotiating tactics until you have a sound strategy. If you rely on a negotiating counter-party to build your business strategy, then they are calling the shots. This isn’t necessarily a terrible idea – if you have structured your deal accordingly and have conducted proper due diligence. Many westerners, however, find out too late that they aren’t really the ones making the significant decisions.

Don’t require that your Chinese negotiating counter-party choose between being honest and smart. They’ll choose smart every time – and if they don’t, you probably don’t want their help with your China plans. The remedy is to learn more early and structure smarter deals that will survive for the long term. How do you achieve this? Ask more & better questions and dig beneath the surface. Many westerners complain that Chinese deal-makers waste too much time on small-talk and relationship building activities, but those are the best opportunities for learn more about the process. If you feel that you don’t have enough visibility to understand where your negotiation is taking you, then slow down and bargain for the information that will shed light on your real situation.

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