Negotiate a commercial contract? Consider the interests of the other party

People in business are constantly engaged in negotiating: with current and potential customers; with suppliers and other vendors; and, with others within their own organizations. Those who are successful in business are often those who have developed the necessary skill set to become effective negotiators. Good negotiators recognize that a successful negotiation is more than just doing a deal – it’s about making a deal well negotiate. Good agreements are more likely to occur when the parties can reach a contractual agreement that satisfies one or more of the following: interests interests of each of the parties.

Interests are the underlying needs and concerns that the business negotiator seeks to satisfy through a contractual relationship with another party. Interests are the underlying reasons why a company is involved in a deal. Successful business negotiators approach a negotiation as a problem-solving exercise in which the basic problem is to devise a solution that satisfies one or more of the underlying interests of each of the parties. Conversely, less effective negotiators tend to approach business negotiations by focusing on the positions they intend to present for the consideration of the other party. The difference between positional and interest-based trading is illustrated by the following example.:

“Consider the story of two men who fight in a library. One wants to open the window and the other wants to close it. They argue over how much to leave open: a crack, half, three-quarters. There is no solution to satisfy them both.

Enter the librarian. She asks one why she wants the window open: ‘To get some fresh air.’ She asks the other why she wants it closed: ‘To avoid the current’. After a minute’s thought, she throws open a window in the next room, letting in fresh air without drafts.” Roger Fisher and William Ury, Getting to yes: negotiating an agreement without giving in (1991), p. 40

Each of the two men focused on their own positions and completely missed a solution that would effectively reconcile their underlying interests. As the example above suggests, negotiating positions tends to lock the negotiator into defending or advancing his position to the point that his own ego identifies with the position. The more attention is devoted to the position, the less attention is paid to the underlying interests of the parties. Agreement becomes less likely, and any agreement that results may simply be “splitting the difference” between the parties’ final positions rather than exploring a solution that could have achieved more for each side. That makes for an inefficient process in which both sides tend to start with extreme positions and slowly and reluctantly give ground, increasing the time and costs to reach a deal, as well as the risk that it won’t be reached. to no agreement.

The ability to identify the interests of the other party in the course of the negotiation process can be critical to achieving a mutually beneficial contractual relationship. The reality is that if the party you are negotiating with cannot satisfy their own interests in a deal with you, then they will either make a deal with someone else or be out of it. Knowing the other party’s interests will help you determine what you have or can offer that is of value to that other party. This will allow you to craft a proposal that meets the other party’s interests and also makes business sense for you.

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