What is commitment?
Commitment is what each side has agreed that it will do or not do. Commitments should be:
- Practical – reasonable, attainable and doable under the circumstances
- Durable - lasting; not subject to every changing whim
- Understood by all – clear in performance expectations
- Verifiable – able to confirm by monitoring of performance
Determine the right time to conclude
You should conclude when you have what you want and the other side feels the same way, as long as negotiations are still positive. Put another way, conclude the agreement when you are satisfied that this is a win-win agreement and the other side feels the same way.
There is a natural tendency to want closure, to resolve this challenge and move on to the next negotiation. When you feel the inclination to conclude, ask yourself:
- Is this a good time to close, or will we benefit from more bargaining?
- Can the passage of time be used to leverage additional trades?
- Were any issues put aside for later that we forgot to return to?
- If we were executing the agreed upon terms, would compliance be an issue?
- Do both sides feel a sense of valuable accomplishment? All interests have been met?
- Is there benefit to be gained by "Nibbling" – a small concession asked for in exchange for closure?
- If things are positive, this may be a good time to agree on a dispute resolution procedure if you haven't already. Prepare for disagreement while the parties are in agreement.
- Never close on a negative note
If there is a negative atmosphere, it is usually better to continue negotiations. Leaving bargaining with one or both sides unenthusiastic or disappointed at best, and angry, is a potentially disastrous time to conclude negotiations. You may be pleased to finish, but if a sense of valuable accomplishment is not shared by both sides, you are more than likely to be back at bargaining (or in a contract dispute) sooner than you think.
Dissatisfied parties tend to raise issues again when the final written agreement is being prepared, or when performance lags, and certainly if the situation deteriorates to litigation or other conflict – both of which are avoidable.
Recognition of negative feelings in yourself or your counterpart signals that while positions may have reached alignment, interests have not been successfully resolved. Try these strategies to keep the discussion going until interests are truly resolved:
- Raise a minor issue that was allowed to remain undecided, and see if the tenor of the discussion can be returned to a positive note.
- Suggest that while the issues have been decided, you sense the other side is not happy with the agreement, and you would like to hear about how they feel. This approach can reveal unresolved interests, and at a minimum makes the other side feel better that you are concerned enough to inquire.
- Acknowledge the market forces or other external factors that make this agreement less than what your counterpart would want, and try to gain some acknowledgement by the other side that you have done your best to understand their misfortune and still make an agreement worthwhile for both parties.
- Show appreciation for their position and effort.
- Making no headway? Suggest a break – hours, days, weeks – and return to bargaining with a fresh perspective.
Beware of Premature Agreement
Recognize factors and tactics that can provoke agreement prematurely, and regrettably. Some are psychological levers we impose upon ourselves, and others are tricks that can bring about significant consequence.
- Scarcity: Assertions of competition or scarcity – bluffing or real
- Deadlines. Probe to determine credibility or arbitrariness
- Deadlines associated with events out of the parties' control
- Time limits – if you sign today, you get a bonus, preferred team member status, a discount, more favorable interest rate, etc.
- Ultimatum: Take it or leave it. (Of course, they may have BATNAs too)
- Walkout: Can indicate an authentic deal threatening event, or the significance or magnitude of the issue to the party who walks away.
- Over-commitment: The feeling that you have already invested so much time and resources in the negotiating process that any agreement is better than no agreement. The tactic of Nibbling works well against a party that is feeling the weight of the investment of time and resources because they want so badly to finalize agreement.
- Split the difference offer (the classic compromise): An offer to split the difference between the last positions on the table is easy to compute and feels reasonable and decent. Refusal can seem disrespectful and unreasonable. Check your MDO, Goal and LAA. Splitting the difference isn't always fair – especially if the opening offers weren't balanced and one side started aggressively and the other side started at a reasonable point. Consider compromising, or splitting the difference only at the very end. Splitting the difference anywhere before the very end of negotiations also eliminates all the good will that arises from the discourse of real bargaining.
Strategies to gain commitment to a final agreement
The most promising way to gain commitment to a final agreement and ensure compliance is mutual satisfaction of interests. And to gain a full understanding of the other side's interests requires that they trust you enough to reveal them. It is the use of a collaborative negotiation process that builds the relationships in a way that fosters trust and thereby leads to the satisfaction of interests. Without full satisfaction of interests, you will not gain commitment that is practical, durable, understood by all and verifiable.
The mutual satisfaction of interests, however, is not always enough to gain commitment. In those instances, there are other effective strategies. Like a donkey that won't budge, we sometimes offer a carrot, and sometimes use a stick to get the donkey to move. Similarly, the strategies below, through either positive reinforcement, referred to as carrots, or imposition of penalties, referred to as sticks, may be the push needed to secure commitment.
- Offer a simultaneous exchange to seal the agreement – such as the transfer of assets.
- Make agreement dependent on mutual performance, where something important will come to pass only when both parties perform as agreed.
- Reward the other party for the willingness to take action (i.e., bonus, vesting, raises, discount).
- Memorialize terms thus far agreed upon. Seeing things in writing can generate a feeling that the agreement is as good as done.
- Make a public announcement. For example: Issue a press release that "Company X will pay $1.2M for fiber optics to reach its North Pole Hotel." In an email to your bosses, announce that "Marketing and Engineering have agreed to re-launch product x with an outsourced warranty service."
- Build in penalties up front for failure to reach agreement, such as loss of deposit or bond.
- If there is resistance to putting agreed upon terms in writing, it may be an indication that compliance is not likely, in which case you may want to take precautions, such as building in monetary penalties.
- Suggest or impose an increased risk of loss of face, reputation, or money damages if the parties don't consummate what was agreed by the fully authorized negotiators.
- Strengthen your BATNAs, and make them well known to the other side. But remember, you can issue warnings without issuing threats.
- The most widely accepted stick is a written contract that is enforceable by law. (Of course some verbal agreements are also binding, and not all written agreements are binding, depending on the legalities of the situation.) Assuming the written contract is legally binding, however, it provides a powerful disincentive to back away from a commitment.
- Even with what appears to be a binding written contract, parties in some cultures elevate the relationship over contract terms, and will expect you to continue negotiating changes in circumstances long after a written contract is signed.