Understanding Contracts - What's Your Strategy?

OK, you made it, you have a deal. It's great, it's perfect - life is good and now you just want to get on with the business of fulfilling your end of the bargain. But, how do you make sure that the people responsible for carrying out agreement actually understand what they are supposed to do?

Chances are you aren't going to find too many people excited to dive into the language of the contract every time they have a question or a question about upcoming contractual milestones. You are going to need some kind of summary - a way to help the business people understand what they have to do without drowning them in the finer legal points. One strategy we've had a lot of success with at the Studio is to use Mind Mapping software to create a Deal Map. A visual summary of important deal terms. We use MindMap Pro to help us create our Deal Maps.

There is definitely a craft to Deal Mapping. The need to be legally accurate and easy to understand can take some teamwork between you and your attorney/legal department. But the payoff can be realized in having greater certainty about important contractual elements and a confidence that each new deal will be implemented accurately and on time.

For an example of a simple Deal Map, click here.

The Importance of Trust in Negotiations

Trust is a delicate, often mis-understood and, far too often, abused dimension relating to all kinds of human interactions, but since this is a blog about negotiation, we'll stick to that today, trust me.

First off, why is trust so important in negotiations? Simply put, if I can't trust you to fulfill your end of the bargain, my incentive for making good on my end diminishes greatly. What is the point of faithfully executing my duties under our agreement if you aren't going to live up to your end of the deal? However, trust goes deeper than that and comes into play much earlier than at the time the agreement is finalized. From the outset of a negotiation, trust plays an important role - both emotionally and logically. As explained by the folks at ChangingMinds.org trust has two major facets - Emotion and Logic:

Emotionally, it is where you expose your vulnerabilities to people, but believing they will not take advantage of your openness. Logically, it is where you have assessed the probabilities of gain and loss, calculating expected utility based on hard performance data, and concluded that the person in question will behave in a predictable manner. In practice, trust is a bit of both.

So, how do you go about building trust? While each situation is going to differ depending on the various factors involved, the following ideas should provide a starting point:

1. Establish a line of communication: This is a crucial first step to help you avoid problems down the line that may crop up as the result of misunderstandings. If you haven't established a line of communication before problems exist, it may be harder to gain their trust when other issues are clouding your relationship.
2. Explain yourself: This goes hand in hand with establishing lines of communication. How many times have you found yourself shaking your head at the other side's demands? What are they thinking!? Communication is a two-way street. Explain your reasoning behind your negotiation position and ask for reciprocity. If both sides have more information, that can easily lead to creative solutions that might not have been obvious when you are guessing about the motivation and reasoning of the other side.
3. Guard your reputation: It takes a lot of work to establish a good reputation and only one false step to ruin it. Your reputation can go a long way to paving the way for trust to grow in a negotiation. The opposite is also true - your bad reputation will make things much more difficult.

Once you have established trust in a negotiation, you will have a powerful tool to help you leverage your position and get the deal done! For more ideas, check out Deepak Malhotra's great article: Six Ways To Build Trust In Negotiations.

Deal World Rule #6 - Laws of Behavior

There are certain laws of behavior that have become widely accepted over the passage of time. Knowing these laws and how to apply them can enhance your negotiation skills. Allow us to share a couple of our favorites:

The Law of Reciprocity. Simply stated, others will reciprocate in kind based upon the way you treat them. When you give and take in a negotiation, make sure you do so with this law in mind.

For example:

• Set up any concessions with a clear label and definition of what value you are giving up – this invites reciprocity.
• Create a deal culture that fosters a spirit of reciprocity at the outset – announce
• that you expect to create a fair deal for all parties.
• Make contingent concessions – I will yield on X if you yield on Y.
• Release your concessions over time, not all at once – hold some reciprocity ammo in reserve for future exchange.

These ideas are discussed by Deepak Malhotra in Negotiation Genius.

The Law of Reinforcement. Simply stated, people learn to repeat behaviors that are rewarded. This works for good and bad behavior. Reward the behaviors you want to encourage, and not those you want to discourage. Some guidelines you could apply to your deals:

• Be the Change – Act the way you want to be treated.
• Quickly make the connection – Immediately praise desired behavior.
• Be Clear – Your reward should be clear and consistent, such as a nod, offering of an Altoid mint, open smile, eye contact, or a sincere thank-you or compliment.
• Reward behaviors, not moods or intentions – Don’t get caught up in trying to reward an attitude of the other party, stick to behaviors.
• Ignore bad behavior – if that does not work, punish it.

Some of these ideas are discussed by Leigh Thompson in The Truth About Negotiations.

Are you mindful of the laws of behavior during your negotiations? If so, congratulations. If not, start today.

Social Status in Negotiations

Often times in a Negotiation you can spend hours and hours in preparation for the meet up with the other side. You can learn all there is to know about your position and the needs of you client along with the possible points of agreement and/or disagreement with the other side. But, do you take into account the Social Status of the parties in your negotiation? It might be trickier than it seems.

First, it's unlikely that anyone is going to come out and say that they want to be treated with special deference and respect. Play it safe! Don't assume that if you are laid back and casual with respect to your own social status that others will feel the same way. Being overly informal and familiar may be off-putting to your those you are working for or with. Take time to get to know all the players - watch for clues in the interactions between all the players.

Second, acknowledge the particular status of each person! This seems like a "no duh" moment, but think about how often people feel under-appreciated. Taking a few moments to acknowledge a person's status and to defer to them in their various areas of expertise will help you win allies and goodwill. '

Finally, be aware that you can take things too far. Often times the social status of a person may blind us to their lack of substantive knowledge in a particular area. Don't let yourself be blinded by status when working with a diverse group. Acknowledge the subject matter experts and solicit their opinions when they will help you make better decisions.