In the West, negotiation is the prelude to business. In China, negotiation IS the business.
Westerners have to stop fighting the clock when negotiating in China. It is killing us. Every time you tell your Chinese counterparty when you are returning home, you give away all of your power. They know your self-imposed deadline – and they know your HQ expects you to return with a signed contract. This does not make for a powerful negotiating position. Make your own travel arrangements, be vague about your schedule, and if you can fix it so that you are going to another city in China after you leave them, then so much the better. Remember – Chinese negotiators are more afraid of you teaming up with another Chinese business than going it alone.
Negotiating in China is a marathon, not a sprint. You have to allocate resources properly – not just for the business, but for the negotiation itself. Treat your China negotiation as a separate operation with its own timetable, budget, and manpower plan. Westerners view negotiation as a hurdle they must cross in order to get to the business, but Chinese feel that negotiating IS the business, and it doesn’t end as long as the relationship continues. That’s a completely different orientation, and it has been the downfall of many promising deals (and western executives).
More than money.
You must prepare for a long, exhausting campaign in which one of the most effective Chinese tactics is to wear you out until you just give up and go home. Make sure you have the staying power by preparing in advance. If you have the right resources – money, manpower, time and management – then you will be able to negotiate successfully.
What resources should you allocate to your China negotiation?
• Money– This is the most straightforward and simple budget you must prepare to succeed in China, but it is by no means the only one. Westerners are better at budgeting for doing the business (operations) than they for getting the business (relationship-building, negotiating). The negotiating process in China isn’t fast, and it isn’t cheap. Chinese tend to negotiate in teams with people from different levels and departments of their organization — and they expect you to do the same. Make sure you allocate funds for sending whomever you need to wherever they must go for however long they will be there. The trick isn’t getting a signed agreement or contract – that’s relatively easy to do. The real key is to build the relationships you’ll need to actually get the business done. In China, that’s the only true measure of success.
Warning: Relationship-building requires that you put in the face-time, and that means multiple visits from a range of people – both before and after the contract is signed.
• Manpower (including YOU). Westerners tend to think that budgeting begins and ends with money – and that manpower-planning is a minor operational detail that is best delegated to HR managers. This can be fatal in China. Negotiating in China is labor-intensive and requires a lot of prep work. Who is doing your legwork? If it’s your team, that means they aren’t doing their regular jobs. If it’s you – then YOU aren’t doing your regular job – or are trying to do both. But if you let your Chinese counter-party help, then you weaken your negotiation position and make yourself vulnerable.
Warning: American managers who delegate or outsource staffing decisions to partners, consultants, or Chinese HR departments have to make sure they don’t end up training their own competition. Staff with no loyalty to your firm will leave as soon as they understand you technology.
• Time — other resource Western managers ignore at their peril is TIME. Chinese negotiators are simply better at using time as a strategic asset. The classic move is fill the first few days of your negotiating trip with tours, banquets, and relationship-building activities, so that by the time the real negotiation starts you are worried about catching your flight home. Chinese negotiators can be extremely patient and careful, but quickly turn impatient and aggressive when it suits their purposes.
Warning: Prepare for the post-signing negotiation. “Just in Time” works for inventory and spare parts – not Chinese partners and service-providers. If they know you need it soon, you’ll pay more in terms of cash and quality
• Managerial Bandwidth (i.e.: sanity). In Chinese negotiation, if you lose your cool you lose the deal. Chinese negotiating tactics can appear somewhat passive-aggressive by Western standards, and you can expect them to apply pressure by springing bad news, new terms, and bureaucratic obstacles on you without warning. If you haven’t budgeted correctly for the first three variables – Money, People and Time – then you will be vulnerable to these techniques, and may be tempted to agree to any deal that promises to solve short term difficulties.
Warning: Focus on doing the business, not getting the deal. If you can’t trust the other side as negotiators, then you should be careful about trusting them as partners.
If you haven’t already read the report “10 Common China Negotiating Mistakes”, please download it. We are in the process of developing an interactive online course based on the report, and are looking for 10 beta testers. If you are interested, please get in touch.
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