How to Negotiate as an International CEO
Negotiation occupies a dominant position in the business world, particularly when it involves international transactions. Understanding and managing cultural differences are essential to successful negotiations in an increasingly globalised commercial environment.
Here Jean-Claude Usunier Emeritus Professor at HEC Lausanne and author of recently published International Business Negotiations, talks us through the most important elements of international negitation.
Negotiations play a critical part in the world of business, especially when it comes to international deals. And in today’s increasingly global business environment, understanding and managing cultural differences can be the key to successful negotiations.
For CEOs and senior executives who find themselves negotiating with international partners who differ in terms of culture, communication style, time orientation, as well as personal and professional backgrounds, understanding the complex range of factors that impact Intercultural Business Negotiations – or ICBN for short – is a fundamentally important skill.
One of the most important things to remember is that because it is complex, ‘culture’ does not have a consistent or direct influence on negotiation behaviour – far from it. While some beliefs and assumptions in business are universal, many others will be culturally relative because of the deeply-rooted differences in the cultural, human and social backgrounds of those involved. Take bargaining; even if it is a universal activity, the approaches taken and behaviours will vary enormously depending on the cultural background of those doing the bargaining.
So effective intercultural negotiation requires far more than just understanding superficial differences in business and trying to avoid obvious misunderstandings.
Relationship or Deal?
Most CEOs will be familiar with the chicken-or egg question that is fundamental to every negotiation: what comes first – the deal or the relationship? Are relationships simply a by-product of negotiation or do deals follow relationships?
Negotiation isn’t just about ‘doing’ – legal and business matters, hard facts and contractual arrangements. It is also based on ‘being’ – the quality of human and social relations. And it’s often these “soft facts” that are the most importance in an intercultural context. So it’s vital to assess the balance that needs to be struck between relationship-building and deal-making. Do we just want a signed contract, or are we looking to build long-term links?
What Type of Deal?
The answer to that question will be hugely influenced by the type of negotiation that is taking place. A one-shot sales/procurement contract will be far-more ‘deal oriented’ than the longer -term relationship building focus required to negotiate repeated deals, joint ventures or M&A agreements, and negotiating strategies should reflect these differences.
Before you Start
Preparation is critical. But there is always a balance to be struck between meticulous planning and improvising. Over-preparing can lead to rigidity and a lack of flexibility about outcomes, so it can be tempting to underprepare and try to learn quickly at the start of the face-to-face negotiations. Equally, be prepared for the other side to be anywhere between prepared, half-prepared, or unprepared. Brexit is a good example of this.
It’s critical to collect key information prior to the negotiation. This includes defining the main aspects of the deal and the problem to be solved. This starts with establishing a list of the issues at stake and ranking them from the least to the most contentious. It can also be a good idea to define what one is ready to accept as well as to guesstimate what the other party may be ready to accept or not, rating the acceptability of solutions for each side on a scale from desirable to unacceptable.
Remember, too, that negotiations can be simulated by team members to confront personalities, communication styles and possible conflicts and to help assess possible intercultural obstacles and opportunities.
Defining what your basic interests are and identifying the expectations of the other party will enable you to identify the common ground for negotiation. However, CEOs must be also prepared not to reach an agreement. So be aware of your alternatives and decide in advance what you will do if negotiation fails and how this may impact the business. Similarly, assess whether the negotiation partners are likely to walk away without a negotiated deal, or if they are looking to build a longer-term relationship.
Irrespective of whatever conventional negotiation theory might suggest, it is a mistake to assume that every negotiation should or will result in a win-win outcome, so it’s important to manage the expectations of key stakeholders accordingly. While many cultures and organisations emphasise collaboration, others (e.g. Chinese) will pursue a win-lose (or, even worse, lose-lose) strategy with a defeated loser and a winner who has overpowered the vanquished by losing less. There is also a general consensus that Russian negotiators have changed little since the Soviet era – conflict-prone, unconcessive, secretive and obstructing, with a tendency to play a zero-sum game.
It goes without saying that communication style is all-important. Even whilst English is the language of business, cultural hostility can still easily be amplified by language and communication problems. Intercultural misunderstandings can also arise in cultures where there is a natural tendency to adopt defensive stereotypes. What’s more, cultures also differ in terms of the explicitness and contextualization of messages (direct vs indirect communication styles). And that’s before we even get to issues of non-verbal communication, which can be an infinite source of differences and misunderstandings.
With so many variables at play, there are few hard and fast rules for ‘good’ communication, which can prove useful for senior executives.
Take your Time
Resist the temptation to ‘get down to business’ as quickly as possible and take time for adequate preliminaries (especially if it’s a first-time encounter with long-term partnership potential). Some cultures (notably North Americans) are highly time conscious, achievement-oriented and impatient. For others, the concept of “wasting time” has little meaning. These differences can be leveraged by the negotiating parties: for example, it is widely perceived in Asia that Americans will make concessions close to a self-imposed deadline in order to get a signed contract. Be mindful of these different perspectives. Where negotiations take place also impacts time-scarcity, are introduces the pressure of potentially wasted time which can create tension.
For anything beyond a one-shot ‘sale’ deal, it’s prudent to think beyond short-term imperatives and try to develop long-term relationships. Key senior executives in your own team can act as useful go-betweens and help to set the foundation for a negotiation built on trust. When dealing internationally be aware that there’s a huge difference between cultures where ‘my word is my bond’ and those which want to ‘get everything in writing’, so contract-oriented CEOs need to be prepared to resist the temptation to introduce lawyers too early in the negotiation process and to accept that negotiating beyond negotiation is the norm in many non-Anglo Saxon societies.
Finally, as they seek better joint outcomes, culturally-aware CEOs would do well to remember the words of the distinguished American lawyer and academic, Professor Jeswald Salacuse, who observed: “Conventional wisdom holds that differences in culture among negotiators are almost always an obstacle to agreement. But culture in a negotiation can be much more than an obstacle: It can be a weapon, a fortress, or a bridge.”