Negotiating to add value in China brings new challenges
The old joke among international negotiators is that when a Chinese businessman says he believes in “Win Win” negotiation, he really means that he wins now – and he wins later.
When Roger Fisher and William Ury wrote Getting to Yes in 1981 one of their most controversial ideas was win-win – that both sides could benefit from a negotiation by finding new ways to add
value and enlarge the “pie”, or total benefit of the deal.
While it’s a great principle, one of the prerequisites is that both parties to the negotiation have to be “rule breakers”. They each have to be able to go off the established playbook and innovate. In China, where not all negotiators have the same range of motion to champion creative or novel methods, this approach often leads to disappointment and failure.
Win Win has implications for Chinese negotiators.
- Principals only ?. There are some who say that you should only negotiate with the boss in China, and that anyone but the owner is a waste of time. If you are buying plastic parts or haggling with the owner of a 3rd tier workshop, this makes a lot of sense. But if your business is with an SOE or multi-million dollar enterprise with multiple branches and business lines, it may be counter-productive. Busy paternal leaders are notoriously difficult to connect with – and dilettante absentee owners make a mockery of this practice. Your best bet is to take the time to figure out how your existing contact fits in on the organizational chart.
- SOE (State Owned Enterprises) can’t do it. In recent years, Beijing’s corps of bureaucrats and administrators have taken pains to reform their images. They now appear modern, market oriented and open minded. While this isn’t exactly a false façade, it shouldn’t be taken as a sign that the Pillar Industries have become hothouses of entrepreneurial creativity. Precedent still rules – particularly if your deal isn’t for billion-dollar energy or agricultural assets. Find out what established bureaucratic practice is early, figure out your options, and re-check your business plan to make sure your strategy still makes sense.
- Employees talk about innovative, win-win deals – but this may be a ploy. One of the rules of Chinese negotiation is that any concession you even hint at – no matter how hypothetical the context – gets carved in stone, while their sworn guarantees are conditional at best. This is a factor when mid-level employees with vague titles start spinning “what if” scenarios. “What if we could improve quality at a lower price with a faster lead time – would you make us your exclusive supplier for all of Greater China then?” It may quickly turn out that the quality is average, the price pops up and they can’t stick to their own timetable – but they still expect you to honor your “promise” to grant them exclusivity. Best practice in China is to always have an alternative counter-party.
- Entrepreneurs are the ones most likely to talk about innovative Win-Win deal structures and exciting business tie-ups. The problem isn’t that they’re lying – they might just be too optimistic for your own good. Before you go too far up this particular path, find out who they’ve worked with before and what kinds of deals they’ve done. You might not lose cash or assets on a pie-in-the-sky brainstorming session with a young Chinese start-up, but you will be giving up potentially valuable ideas and getting nothing in return. Always check references (even if it is done informally).
- The Switcheroo. Regular readers will be familiar with the dangers of the Chinese BoPs – The Balance of Power Shift. In this scenario your Chinese counter-party is anxious for your help, and willing to repay you with insider knowledge and market access. “You are so smart, so accomplished, so sophisticated…” etc. Once the flattery starts you immediately lower you guard and make what you consider to be a solid Win-Win proposal – you’ll help him with technology, business process or branding, and he’ll help you establish your business in China. The problem is one of timing. You have to help him first – and once he understands your “secret sauce” then you find you have just trained your newest competitor. He won’t even take your calls anymore.
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