Chinese negotiations never end – so make sure your front line has the tools to represent.
No discussion of China negotiating teams would be complete without examining how the front line negotiation function integrates with strategic decision-making.
In the US, negotiation is often a delegated function or professional specialty. Large companies have sales teams and purchasing departments who carry out negotiations on their own, and then report back up the chain of command. Lawyers – be they in-house or outside consultants — take the lead on negotiations affecting the entire company. Few US companies identify negotiation as a key competitive advantage. In China, however, negotiation is often seen as an integrated management function. Senior Chinese execs are quicker to get involved, and pull the strings more often. US managers see negotiation as a gateway or overture to business deals — while execution and implementation phases provide the real value. China, in contrast, often competes on price and works with very slim margins, so the ability to negotiate, bargain, and react quickly is of paramount importance.
Mission NOT Accomplished. Put Away the Flight Suit.
This difference in orientation can lead to conflict and lost value for Western firms. Senior American managers have an unfortunate tendency to declare “mission accomplished” after a few days of relationship-building meetings. Once they see a signed agreement or contract, the boss turns over responsibility for the new China relationship to a specialist — salesman, purchasers or line managers. The Chinese side however is still negotiating — and as far as they are concerned the situation is still quite dynamic. When the purchasing manager or salesman tries to push the Chinese side to execute the deal terms laid out in the contract, it sparks mistrust, suspicion and frustration. The situation can quickly deteriorate into tension, conflict, and aggressive negotiating behavior (ie: cheating, IP theft).
There are steps that Western managers can take. One of the simplest – but for some American managers, the most painful — is to give more power to the people on the front line. This might go against the playbook of corporate sales and purchasing teams, but it’s a good idea to develop some new patterns and procedures for the China market. In the US it is standard operating procedure for senior management to negotiate a strategic relationship with his Chinese counterpart and then take themselves out of the negotiating process. Unfortunately, this leaves the front line negotiators vulnerable and weakened. Chinese negotiators – knowing that the Westerner is bound by the agreement made upstairs, press their advantage in terms of price, quality and timetables.
Western firms need to empower their front line negotiators – the salesmen, purchasing managers and staff supervisors – or they put their entire strategic relationship with the Chinese side at risk.
Here are five areas to start giving front line negotiators more power in China:
- Power to grow the network. This means two thing: putting down deeper roots within your existing counterparty’s organization – and cultivating new counterparties. In China, if you are not constantly developing your network of contacts then you are losing ground. This should be tracked, planned and integrated into your overall operating plan.
- Power to build and intensify the relationship with counterparties. If you want to be successful in China, you have to move the relationship forward. Your front line negotiators should be trained to spot and exploit new opportunities to strengthen your organizations relationships with Chinese counterparts. This could mean offering technical assistance, providing marketing support or developing new ways to cut costs.
- Power to hit the brakes. Make sure that you aren’t sending “Yes Men” to negotiate. If senior executives have created a high-profile strategic relationship, you run the risk of turning your front line negotiators into order-takers and delivery boys. The problem is that the Chinese side will exploit this weakness, and quality will suffer. Your front line negotiators need the ability to adjust orders and timetables – and maybe even to downgrade or terminate the relationship.
- Power to call in big guns and special forces. As we’ve discussed, negotiation is a team sport in China. Make sure that you have a pain-free process for front line negotiators to call in higher level executives and specialists from other departments as needed.
- Power to come home empty-handed. If the Chinese side knows that your guy is due to come back with a signed deal at a certain time, then he has no power and will return with a worthless document. At the end of the day, the only thing your Chinese counterparty fears is that you will leave him for a Chinese competitor. If your front line negotiator is worried about the consequences of coming home without a contract, the Chinese side will pick up on it and force a weak and disadvantageous agreement on you.
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