For more than three years, Marec Bela Steffens was a commercial sales manager at a Sino-German joint venture in Shanghai. He and the local staff he trained on the job have negotiated the commercial conditions of contracts worth more than US$700m. This month he looks at the practicalities of the negotiating process.
Tactics and behaviour
-Put the other side's honour at stake. For example, say you cannot imagine that for such a strong and powerful partner this con-tract clause can be so difficult to fulfill, or that you do not understand why they are so much against the default interest clause if they are stressing they will pay on time. However, do not press too far with this approach.
-Try to control the atmosphere of the negotiation. Have a lot of patience but do not always show it. Negotiation is a game. "We all act and those who know are wise," (Hofmannsthal).
-Watch whether the other side's anger is genuine or merely a tactic. An indication of the latter is if only part of the other team gets excited while the others stay passive.
-Do not be afraid of your own courage. Timidity will not be respected.
-Open insult should be resisted coolly. Forget your vanity, but not your self-respect. If the other side persists, point out that you could also talk about some of their faults. Show you do not want an escalation but that you are not afraid of it. It might be helpful to remark that this exchange does not really help and that you all should return to the subject matter.
-Being a cynic helps sometimes, but restrain yourself while you are together with the other side. Also, being cynical should not exempt you from self criticism.
-The oldest games, like ‘good guy/bad guy,' can very often help. Use different team members for different roles. March separately, strike jointly.
-Jump on a moving train. If you observe the other side is moving into a certain direction and attaches some importance to it, try to get your benefit from it.
-Give examples from other branches or everyday life to illustrate your point. Even if the examples are rejected, they will help you to be understood.
-Be ready for all kinds of surprises, both good and bad. You never know. A customer who paid after a long delay last time may now pay at once. In China, heaven and hell are very close together.
-Use time pressure to your own advantage and control the timing of your departure. You are negotiating because both sides want something and the other side might have made a commitment to a senior leader for a certain project completion date.
-Chinese are used to very regular meal times, so they tend to get nervous at 11:30am and 5:30pm if there is no break in sight. Do not create strain without purpose.
-Occupying territory is the key to success. Your opening position should be in the other side's territory and allow for a few concessions which you planned in advance. Then keep on retreating, generally getting slower, but not in predictable moves. Your retreat gives the Chinese side the feeling of success but your opening position means that you can still keep the battle far from areas where you are vulnerable.
-Use your own text for all kinds of contracts and protocols, and keep on editing them after the negotiations. You have a better, influence over your text and the other side feels good if they get some of their changes accepted. By contrast, they would feel bad if you forced them to change their own text.
-If the other side wants something which is obvious nonsense but does you no harm, accept it. Do not make the other side angry if you have nothing to lose. But explain to your boss later why you put such a clause into the contract.
-Whenever you give in, give the other side the feeling that they really achieved something from you. Compromising is an art.
-Do not settle every point at the moment when it is raised. With easy issues you can do it, but other points should be collected on a list. Explain you cannot settle an issue if you do not know what other demands they have which would also cost you money. If you have been through all the topics and have compiled such a list, try to keep it closed for new issues (although that will be difficult). Then try to find out their priorities and make a package deal.
-Very often you will be told that something is a legal requirement. Ask to see the law or regulation, then check with your own lawyer. If they do not show you the law, close the matter.
-If you cannot give in on a certain point, offer a few variants for a compromise. Keep the ball in play. Find out the underlying motive for their demand; there might be something which serves their purpose as well as their original demand but at lower cost to you.
-Do not allow the other side to collect your concessions one after another during several rounds of negotiations. Stop this salami tactic by making your key concession conditional: if we sign an agreement here and now, you will get this concession – if not, we talk on this matter again when we meet next time. Be careful, as they will still try to understand your concession as unconditional. If the time is right, get things nailed down.
-Be careful when offering alternatives, since this concept is not widely understood. Remember how many times you asked a Chinese an `either or' question and got a `yes' as an answer. Be aware that the other side will want to have the best of both worlds, but still try to find out their priorities.
-Realise when you have lost. When you have to pay, pay with a smile. Making a concession but fulfilling it slowly or with demonstrative unwillingness makes the con-cession worthless or even counter-productive.
Resolving a stalemate
-Hardly anybody will buy a product because of your nicely worded conditions of contract. On the other hand, once they have decided to buy your product they will not easily walk away if you do not always give in when you negotiate the conditions.
-Absolutely always show dedication to the aim, but not at any price.
-Establish whether the other side really wants the deal. If so, they will not easily walk away but do not make it too difficult for them to accept.
-Recognise whether your own side really wants the deal and what the consequences are if you do not win it. Do not believe too readily that failing to win the deal would be a disaster. Securing the deal on very bad conditions could be worse. Be ready to say no.
-Very often there will be a stalemate. Try to overcome the stalemate with some effort, make a major concession – but only once. On the Chinese side a stalemate can be caused by factors which you cannot overcome at the negotiation table. So if your brave move did not help, do not offer another concession. Instead, use other channels in order to find out the real problem and continue from there.
Final key issues
-Since the Chinese attribute such importance to personal relationships, they are indeed interested in a long-term relationship. But they would hardly ever accept the high start-up costs and initial losses that many Western companies face in China (and elsewhere). So they always assume that the Western partner's prices for machinery, components and seconded personnel include generous profit margins – whether this is true or not. Even subsidised prices will be denounced as too high.
-In China, a signed contract is not the end of negotiations but only the real beginning. No written agreement is final. But that should not make you a fatalist. It is still easier to negotiate if there is a good contract as a basis.
-If you found the other side's negotiating style successful, learn from it and copy it the next time you meet them. If they complain about your tough new approach, tell them you learnt it from them and they should take it as a compliment!
-When you are frustrated with your experience in China remember that, if everything in China were as ‘normal' as it is back home, there would be no market opportunity for your company's products and no need for your skills.
A German version of this article first appeared in Harvard Business Manager. The editors of this magazine kindly consented to this publication.