Failure is Always an Option in Chinese Negotiation

Let’s take momentary break from the usual pursuit of best practices in US-Chinese negotiation and speak for a moment about worst practices. I am referring to the idea that “failure is not an option” (FINAO) when pursuing a deal. For negotiators who know what they are doing, failure is not only an option – sometimes it is the only option. One of the hallmarks of modern negotiating is the concept of BATNA – best alternative to no agreement . This is what empowers a good negotiator and underpins sensible negotiation strategy. If you can’t decide when to walk away then you are a price-taker, which is not a good position to be in when doing a China deal.

Back home in the US, we generally encounter FINAO syndrome among hard-driving young salesmen and financial broker-types who don’t understand how much damage they are doing to their reputation by make every deal a life-or-death struggle and every prospect a mortal enemy. In China FINAO syndrome usually afflicts senior managers who are new to cross-border deal making. A combination of high expectations from HQ bosses and lack of experience finds China novices latching on to the first counter-party who can speak English. They spend all of their time trying to make an inappropriate deal work in an unfamiliar environment. The more resistance they run into, the more vested they become in forcing this particular deal through.

Sometimes the most important negotiation is the internal one. If your HQ is working with a bad set of assumptions and demanding that you deliver on goals that aren’t appropriate for China, you are setting yourself up for disaster. The second worst thing that can happen to you is that your Chinese counterparty gets frustrated and walks away. The worst thing that can happen to you and your career is that your Chinese counterparty figures out exactly what is going on, and signs a deal that is bad for you – or would be good for you in theory, but he doesn’t plan on delivering. In China there are always two negotiations – one about the contract and one about the actual business. FINAO guys do a great job with the first one – and get slaughtered like sheep on the second one.

The best China negotiators know how and when to walk away. They take the time to give themselves options – which includes preparing alternate counter-parties and business models in case their Plan A falls through. But even more important, they take the time and effort to build support with the higher-ups in their own organizations. Good Chinese negotiators will know when you are afraid to go home without a contract, and will make you pay for it – either now or later.

In negotiation, failure is always an option. If you know what you are doing in China, it can be a damned good one.
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