You must know what a success looks like BEFORE you start negotiating in China.
American and European negotiators take a lot for granted when putting a deal together. In their home markets that may work out fine – there are institutions, agencies and a broad range of government and bureaucratic structures in place designed to create a business environment that is more or less level and predictable. Companies care about their own brand, reputation, public opinion and social media buzz. That may be why Westerners tend to ignore big-picture agenda setting issues and focus on a fairly limited set of deal points when they come to China. We want to get right down to business and not waste time on generalities. We focus on money and time – price and delivery dates. Big mistake.
Goals, Agendas and Variables are the framework of successful negotiating
Western negotiators in China need stand back a bit and start the negotiating process BEFORE they sit down with Chinese counterparties. Ask yourself and your team some pretty naïve questions. Start with these five:
- What do you want from this negotiation in the short term?
- What do you want in the longer term?
- Does everyone (your team and theirs) have the same idea of what “long term” and “short term” means?
- What does success look like?
- What can go wrong?
More than numbers
If your answers to these questions were all numbers, then something is wrong with your deal prep. In the US, salesmen and purchasers might be correct to drill down to dollars and cents, delivery and payment schedules. In China, however, the range of potential outcomes is much broader — and your recourse is much more limited than you might think. Good negotiators take everything into consideration, and spend more time asking “what can go wrong” than “what is my upside”? If you plan on using courts, regulators or contracts to protect your interests in China, then you are setting yourself up for problems.
Define your terms and make sure your team is speaking the same language – internally
Goal-setting may seem pretty straight-forward in your everyday business dealings, but before sending a team off to China (or being a member of that team), it might be a good idea to run through two quick drills. First do a serious “worst case scenario” analysis, and consider what can go wrong – first if you fail to get the deal, but also look at what can happen if you get the wrong deal or the wrong partner. You’ll find that a simple BATNA – or Best Alternative to No Agreement doesn’t even compare with the world of hurt you’ll be in if you sign a deal with a bad partner. Your “what can go wrong” drill should include loss of design and technology, damage to your brand, losing control of your trademark, patents and IP in China, and training a cheaper, nimbler competitor. You get the idea – let your fears and paranoia roam free for a while, and you’ll begin to understand what you are up against.
Your second goal-setting exercise is to take your general short & long term objectives and run them up through a SMART framework. What will it take to make your goals Specific, Measurable, Actionable, Realistic and Timely (or Time-bound). In your worst-case scenario, you probably decided that you needed some way to protect your assets, insure quality, and retain ownership of all your IP. Now you have to develop specific measures and benchmarks that will make those vague desires a reality.
Your AGENDA is the Comprehensive list of deal points
Once you come up with specific, actionable and time-bound demands to address your goals, you will have your variables. These are the actual deal points that make up your negotiating game-plan – or agenda. The agenda for a Chinese negotiation will be longer, more comprehensive and more detailed than for a similar type of deal in the US or Europe, because there is so much more that could go wrong.
In China, you have to make sure that the following items are on the agenda:
- IP and Technology transfers
- Dispute resolution
The Chinese side will want to put these on the back-burner, telling you that it is a matter for the bosses and owners to work out informally. Be very wary of this technique, and consider walking away from the negotiation if you aren’t getting adequate protection. Once your cash, assets and designs have been transferred, your negotiating leverage weakens significantly.
Benchmarks are the objective, measureable standards that you use to measure performance. These have to be negotiated and included in written agreements.
Don’t leave home without knowing what constitutes a win and how you measure success. You have to know what you want – and how to measure it – before you start talking to a Chinese counterparty. If you can’t set your goals measure benchmarks and lay out specific steps for failure to comply then you have problems.
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