It’s a scene that’s repeated over and over in commercial negotiations: the parties shake hands, but there’s no real agreement. They don’t realise they were saying yes to different things. Whenever this happens, at some point down the road someone’s expectations will be dashed. The result? Renegotiation, delay, expense, and strained relationships.
You might be able to avoid this by recognising and managing three related problems.
Don’t avoid necessary conflict
A negotiation is, by its nature, about resolving one or more conflicts. Dealing with them can bring lasting agreement, but it’s also hard work. When you are trying to be diplomatic, it’s easy to gloss over a contentious issue. Unfortunately, that can store up unresolved issues for later disputes.
When you think you’ve reached a negotiated agreement, ask yourself: does the other side understand these terms the same way I do? If not, you might both be saying yes, but you don’t really have an agreement.
Any summary commercial terms you agree should be written in plain, clear and direct language. Look out for compromise wording written in diplomatic or “flexible” terms to avoid an argument. Flexible wording is often just uncertainty in disguise.
If you are using lawyers to draft the final text, resist the urge to leave them to work out the ambiguities for you. In commercial negotiations, most ambiguities are actually commercial issues to be resolved. They are rarely just legal details to be worked out between lawyers.
The longer or more contentious the negotiation, the more everyone just wants it to be over and done with. As deadlines approach and fatigue (or boredom) sets in, beware. The urgency to move forward and wrap it up can start to overshadow everything else.
Once everyone at the table finds a way they can say yes and is ready to shake hands, the momentum can be hard to resist. It’s tempting not to ask too many questions for fear of unravelling a hard-fought agreement, but you really need to. You might want to get a deal on paper and signed before anyone changes their mind, but that just stores up trouble for later.
Look closely at the shorthand terms and agreed bullet points, especially around the contentious items. Question whether any of them could mean something different to the other side.
If your deal is solid, it shouldn’t unravel just because you ask some clarifying questions. If it’s not solid, trying to formalise it quickly before anyone questions it will probably be a mistake. Eventually, one of the parties will want changes, and where trust is weak to begin with, this can test the parties’ relationship to the limit.
Confirmation bias in negotiations: human brains “doubling down”
Our brains are hard-wired with certain tendencies that cloud decision-making. One example is confirmation bias: all people tend to interpret things they see and hear in ways that confirm whatever they already believe. This makes it harder for you to change your mind once your opinion is set. The stronger your belief and the more you want it to be true, the more likely it is that you will miss obvious signs that you are wrong.
How can this affect a negotiation? Once you think you’ve reached agreement on any issue, your brain will tend to:
- amplify anything others say or do that would confirm this belief; and
- downplay any clues that you’re mistaken and the issue is unresolved.
There is no formula for counteracting this. We all have confirmation bias, and some are better than others at recognising and managing it. Understanding that it exists is a start.
Test the deal before leaving the table
Before you shake on a deal and leave the table, consider how you can test your agreement.
One technique I’ve used successfully in the past is to get a colleague who was not at the table to speak to the parties separately. Have them ask the parties to describe the final deal in their own words. They can ask clarifying questions along the way but should not comment on the terms. Comparing the notes from both conversations, it should be clear whether the agreement is real and complete enough to start drafting the contracts.