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 Negotiation DOs and DON'Ts
Wise Agreement
Arriving
at a satisfactory business relationship requires two things:
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the
preparation of a
balanced and comprehensive
agreement between parties, and
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civil
negotiations that aim to achieve mutually beneficial results for all of the
parties involved.
Being
well-informed, building an effective
negotiating team and
communicating well
with members of the other team will affect the success of the negotiations.
Various steps to be taken at a given stages of the negotiation process are
recommended. Effective, cooperative negotiations make for mutually beneficial
relations and the long-term satisfaction of the parties to the agreement.
Introduction
A
technology transfer agreement that results in a satisfactory
long-term
relationship between two or more parties is one in which the parties recognize
that the agreement
must provide benefits for each. Once this principle is
accepted by negotiators, the process moves more smoothly. It can be enhanced in
two ways:
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by
preparing a proposed agreement between the parties to serve as the basis of
negotiation that is balanced with respect to their mutual and
conflicting
interests as well as comprehensive, and
-
by
conducting negotiations to arrive at a mutually acceptable final text that
gives each party the appropriate rights and obligations.
The
manner in which negotiations are conducted will also help ensure a successful
end result. Negotiations should
-
obtain
and master all the relevant information needed to correctly present their
interests and options,
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develop
the internal communications that will mould each party into an effective
team, and
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utilize
approaches and techniques that facilitate
communication between the parties
and develop mutual confidence and
trust.
This
guide will discuss the various steps that need to be taken at each stage of the
negotiating process. It will elucidate the elements that maximize the chances of
success, not necessarily in terms of what provisions are incorporated into the
contract but by how successfully the project ultimately evolves, and by how the
relationship between the parties becomes cooperative rather than adversarial.
The cumulative effect of those elements constitutes what is generally referred
to as the dynamics of the negotiation process.
Certain
points stressed here should be kept in mind throughout the planning and
execution stages of negotiations:
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When
making international agreements, it is essential that the
culture of the
other party's country be studied carefully to assure that your own party's
understanding of the other's arguments and interests are clear and that
yours are clear to them. It is just as important to learn their customs to
avoid embarrassments or insults.
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For
any kind of agreement, national or international, learn all you can about
the other party(s): its style, preferences, performance, financial
condition, ethics, expectations from the deal etc. Separate assumptions from
facts. This will help in formulating your own objectives and negotiating
strategy.
Yin-Yang of Influencing People
Planning
Stage
Objectives
Proposal Analysis
Preliminary Relationship Structure
Planning Stage Suggestions
If
negotiations are to culminate in a successful agreement, certain prerequisites
must be met before negotiations get under way.
Objectives
Well
before an agreement is drafted, each party needs to determine its objectives for
concluding a deal. This is an elementary but necessary rule of successful
negotiation. Parties often do begin negotiations without being clear about the
nature and scope of the contractual relationship they wish to establish. This
may lead to ambiguity, misunderstanding and, even, distrust and bad faith
between the parties as the negotiations proceed. Each party should enter a
negotiation with well conceived and adequately supported goals so the process
moves ahead in an orderly manner.
A
technology transfer relationship often begins when one party submits an outline
or preliminary proposal to another, offering rights to
intellectual
property or expressing interest in purchasing such rights. It may take a
meeting or two to help define the market value of the technology or to decide
how to structure the future relationship, especially if the technology is being
transferred for the first time. Once these details have been worked out, one of
the parties, usually the initiator of the proposed relationship, submits a
written proposal to the other as the starting point for subsequent negotiations.
It
is assumed that before writing such a proposal, the submitting party will have
defined its goals and interests. The party receiving the proposal then needs to
study it thoroughly.
Proposal
analysis
The first step to be taken after receipt of a
proposal is to appoint a technical group to analyse it, list all of the
questions it raises and identify and request any additional information that is
required from the party submitting the proposal. There should be no reluctance
to do this; in fact, most parties who have submitted a proposal welcome
questions and requests for information, for it indicates to them that the
proposal is being taken seriously. It gives them a better idea of what is of
particular interest to the other party, as well as any shortcomings of their
proposal.
Information on the subject-matter of the proposal
should also be sought from independent sources. Such information might relate,
for example, to the nature and effectiveness of the technology being proposed,
the market for the proposed product, the quality and production cost of the
product, the potential sources of financing.
All the information received from the party
submitting the proposal and from independent sources should then be reviewed
thoroughly by the technical group. To the extent that the new information raises
additional questions, these should again be posed to the proposing party or to
the independent sources, until the technical group is satisfied that it has all
the information it needs to formulate the preliminary structure of the
relationship.
Preliminary structure for the relationship
Once the required information has been collected and
analysed and it is determined that the proposal should be pursued, a preliminary
structure (and, perhaps, alternative structures) for the relationship should be
formulated and evaluated in terms of how it will meet needs and objectives. If a
patent licence is being offered, the technical team should determine if
pertinent know-how, trade marks, and/or copyrights should be included and should
have some idea of the amount of training and on-going technical assistance
required. In other situations, the agreement structure may require a technical
services, engineering services or management services agreement. At times, a
joint venture may be preferred or required relationship.
Planning stage
suggestions
These are some suggestions for the planning stage:
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Determine alternatives to completing the agreement.
Even one alternative improves your negotiating strategy. The authors of
Getting to Yes, from Harvard Negotiating Project, call this BATNA, Best
Alternative to a Negotiated Agreement.
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Consider the long-term benefits of the agreement.
Don't be overly concerned with the short-term implications.
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Look for areas of agreement between the parties, not
areas of conflict.
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Plan the major issues as independent units, not in
sequence. This will avoid confusion if the issues are brought up out of your
sequence.
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Set ranges for your objectives, not specific points.
The Negotiating Team
Composition
The team leader
Team members
Team discipline
Once a preliminary agreement structure has been
agreed upon, a negotiating team should be selected.
Winning Team: 7 Elements
Composition
Two teams need to be assembled, the planning team
and the negotiating team. The team that does the planning for the negotiation
should consist of, at a minimum, the chief negotiator, a technical expert, a
financial expert and a legal expert. If it is a complex deal, engineering,
manufacturing and marketing personnel might also need to be involved. At times
an outside consultant will be beneficial. It is the planning team's
responsibility to set all the parameters for the proposed agreement so that the
negotiating team has the information it needs to properly present its side to
the other party.
The actual negotiating team for technology transfer
agreements should be kept as small as possible. A simple
patent or patent and
know-how licence may only require one person from each party, the licensing
executive for each. As the complexity of the type of agreement being sought
increases, the team is expanded. Many complex technology transfer agreements are
handled by the licensing executive and an intellectual property attorney. This,
of course, does not preclude discussions between negotiating sessions with
technical, financial, manufacturing or marketing experts. In situations where,
for example, a large production line, a turnkey plant or a joint venture is
being considered, the negotiations may require the presence of technical,
financial and other experts. As the negotiations proceed and once they are
completed, the drafts of the agreement are nearly always prepared by an attorney
skilled in technology transfer agreements.
The team leader
9 Roles of a Team Leader
The chief negotiator's role is a special one. He or
she should command the respect of the other players and be articulate and
patient. A company or a government makes a mistake whet it assigns this role as
a matter of course to the senior official involved in the project. Instead, the
person best able to deal with the particular negotiation should be named the
chief negotiator. An understanding of the culture of the other party's country,
the language in which the negotiations are to be held and the culture of the
company itself are decided advantages for a chief negotiator.
The chief negotiator must have the character and
strength to be able to control a meeting and win the respect of his own and the
other party's representatives. He must have self-confidence, be able to lead and
have the support of superiors. He must also be a person who thoroughly
understands the subject, who is a broad-minded enough to listen to opinions
different from his own and who appreciates arguments and is not offended when
someone contradicts him. He must be vain, but, rather, sure of himself and not
easily influenced by flattery. As well, he must have experience in the business
being negotiated and, above all, must be able to make decisions when they are
needed.
Team members
The technical expert should know the
technology and must understand the technical advantages and disadvantages of
what is being offered. He must have a knowledge of alternative technologies to
those in the proposal and their cost. If at all possible, he should be drawn
from the technical group in the planning team that analysed the original
proposal.
The financial expert should be familiar with
various types of financial arrangements, including potential sources and terms
of both domestic and international financing. He should also be able to
calculate the long-term impact of changes in interest rates, repayment periods
and principal amounts of the financing being discussed, as well as the long-term
financial returns and cash flows from the transaction as it is modified during
the course of negotiation.
The legal expert should have experience in
drafting contracts and should be knowledgeable about the terms and conditions of
technology transfer agreements. If the subject matter is a project for
developing country, a knowledge of technical, engineering or management service
agreements may also be needed.
The legal expert's role needs to be delineated. Some
companies feel such experts should take a back seat in the actual negotiating
sessions as they are often sought to be too dogmatic in their approach. Others
feel the opposite way, reasoning that agreements are legal documents and should
be attended to by legal staff. However, whether the legal expert plays a primary
or secondary role, his main duty is to structure the agreement and its specific
provisions so that they reflect what the parties have agreed to orally. He must
also watch for terms and conditions unfavourable to his side and must be able to
detect subtle provisions that might escape the eye of the business licensing
executive.
Should no suitably qualified experts be available
locally, it would be worthwhile recruiting them from outside the company as
consultants. The cost of a knowledgeable expert can be recognized many times
over by his impact on the cost of a transaction to the acquiring party. If such
an expert is retained, he should participate in both the preparation for the
negotiations and the negotiations themselves.
Team discipline
A negotiating team should speak with one voice.
Usually the lead negotiator is the main person. Other members should speak only
when the principal spokesperson invites them to do so, which should be
frequently as possible to maintain team alertness and spirit. The leader should
try to engage all the members of the team while maintaining his authority over
the team as a whole. Experienced negotiators make a point of looking for any
disagreement between the members of an opposing negotiating team and exploiting
it to their advantage. Obviously, open disagreements between team members must
be avoided, as should disagreements conveyed by facial expressions and
body
language.
Preparing for
Negotiations
Once the negotiating team has been appointed, it
should start preparing for formal negotiations with the other party. This
requires focusing on its own and the other party's key information, objectives
and issues. Doing this before the start of formal negotiations compels the team
to reflect in-depth on each issue and prevents it from later being caught by
surprise or being forced to improvise positions.
Contract Drafts
The point at which they enter the process
If a licensor already has one or more licensees for
a given technology, the earlier
license agreement could be presented when the
licensor is seeking another licensee. Usually, such a licensor has a proven
technology, and existing contracts, and there will seldom be any major changes
to the terms and conditions of another licence for the same technology.
Preparing the first draft
The party that prepares the first draft of a
contract is commonly thought to have an advantage. That is probably true, as the
first draft sets the agenda for the negotiations and places the onus on the
opposing party for arguing for and justifying any substantive changes. However,
the advantage is generally short-lived, because in the end both parties must be
satisfied with the provisions of the agreement for a deal to be struck.
The negotiating team sets the parameters of the
agreement in the planning sessions, sometimes even before any preliminary
meetings. The parameters can then be refined as inputs from such meetings are
received. When the required and desirable provisions have been selected and the
draft has been reviewed and internally approved, it should be sent to the
prospect in sufficient time for that party to review it before a first
negotiation date is set.
Organizational Aspects of Negotiations
In arranging negotiating sessions, a number of
organizational aspects need to be considered. While these at first seem of
secondary importance they none the less have significant impact. Some of the
more important organizational aspects of negotiations are discussed below.
Physical arrangements
The physical and psychological state of the
negotiators during negotiating sessions frequently affects the dynamics of the
negotiation process and can in turn be affected by the physical arrangements
outside and inside the negotiating room.
Meeting length and frequency
It is not unusual for daily negotiating sessions to
last 10 hours at a time. Sometimes they go longer, but that is not advisable.
Fatigue is bound to set in and affect judgment. As in the case of physical
arrangements, the length and frequency of meetings can affect the state of mind
of the negotiators and either speed up or delay arriving at agreement. As a
general rule, 8-hour sessions are recommended, with several breaks for review to
release the tension negotiation usually creates.
Informal meetings
Informal meetings, such as lunch or dinner with
members of the opposing negotiating teams, are highly recommended. In such
settings members of the respective teams get to know one another better and have
the chance to develop personal relationships that will facilitate communication
and understanding between them. Business should not be discussed at such
meetings: they should be kept informal. Team discipline must preclude "side
discussions" of issues by team members other that the chief negotiator in
informal meetings.
Language differences
Negotiations are often carried on in English.
Although the proceedings are sometimes translated into the negotiating teams
native languages by interpreters, ordinary members of the two negotiating teams
need to be sufficiently fluent in English to communicate adequately for purposes
of carrying on negotiations.
Role and
Objectives of Negotiations
While specific objectives may differ from project to
project, the role of negotiations is to provide a forum and a process that will
accomplish three results.
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A mutually satisfactory structure. In the
course of preparing for detailed negotiations, the negotiating team presumably
formulated a preliminary structure for the proposed transaction. The role of
negotiations is to convert this preliminary structure into a structure that
satisfies the interests of the both parties.
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An executed agreement. The negotiating team will have prepared a draft of
the contract documents that contains terms and conditions that it believes are
required or desirable to govern the implementation of the transaction. The role
of negotiations is to reach agreement with the other party on both the text and
scope of the terms and conditions that should be contained in the final
contractual documents.
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A long-term relationship. The role of negotiations is to provide a
process by which agreement can be reached on terms and conditions that are the
basis for a lasting, mutually beneficial relationship. Negotiations should
create an agreement free of the seeds of future conflict. They should not leave
a wake of anger, mistrust or bitterness as that would undermine the future
relationship.
Conduct During Negotiations
Negotiators have different views
on how negotiations should be conducted: whether as an adversarial process, with
each side defending its interests until a mutually acceptable position is
forged, or as a process in which the mutuality of interests is the paramount
focus...
More
Typical
Negotiating Techniques and Tactics
It is often difficult to
distinguish between
negotiating techniques and negotiating tactics. One way is
to think of negotiating techniques as positive methods designed to resolve
issues fairly and negotiating tactics. One way is to think of negotiating
techniques as positive methods designed to resolve issues fairly and negotiating
tactics as clever negative maneuvres to create false impressions and obtain
agreement through deceit.
Conclusion
The
goal of enlightened
negotiation should be to achieve an agreement that is equitable. The process
should recognize the interests of the parties and provide for optimizing the
benefits as measured by objective standards. Enlightened negotiating leads to a
long-term relationship in which both parties focus on maximizing their mutual
return, not one in which each party tries to maximize its own return at the
expense of that of the other party.
Adherents of positional
bargaining - while they enjoy some obvious advantages in dominating a
negotiation – tend to put excessive demands, restrictions, provisions and
royalties into the agreement. Even though the terms and conditions may be
accepted by the other party because it urgently needs the particular technology,
experience has shown that agreements under such conditions can also lead to
discouragement and underperformance. In the long run, fairness will result in
the best return for each party.
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