1) Why relationships matter
• Future transactions of real value are anticipated
• Reciprocity of the other side is expected
• A good relationship engenders trust.
Personally speaking, being a Process Engineer for a metallurgical design and management consultancy, relationships are vital! The Process Engineer industry is small, and many of the big projects requires many people to from different EPCM companies to engage in contract negotiations. Hence establishing sound relationships is vital, as very frequently we'll meet other EPCM companies around the negotiating table and frequently when plant design specifications are not fully met, further negotiations need to be done, all of which is very capital intensive and can become a bitter war, and hence negotiating with other consultants once there is a sound relationship is a lot easier and maintaining these sound relationships is just as crucial. It is also vital to always abide to agreements, trust is a very big factor in this industry, and because it is small, once trust is broken it can be detrimental to achieving future contracts.
2) How Perceptions of Relationship Value Affect Negotiations
• Relationship value moderates extreme ‘value-claiming’ behaviour. Parties thus understand that claiming too much value today will risk opportunities for claiming future value
• Parties who perceive no relationship value will aggressively claim value
3) Tips on doing this better
• Create trust
• Never sweep mistakes under the rug
• Ask for feedback
The Relationship1. Less experienced negotiators often undervalue the importance of developing working relationships with the other parties, putting the relationships at risk by overly tough tactics or simple neglect. This is especially true in cross-border deals. In much of Latin America, southern Europe, and Southeast Asia, for example, relationships – rather than transactions – can be the predominant negotiating interest when working out longer term deals. Results-oriented North Americans, Northern Europeans, and Australians often come to grief by underestimating the strength of this interest and insisting prematurely that the negotiators “get down to business.”
The Social Contract. Similarly, negotiators tend to focus on the economic contract – equity splits, cost sharing, governance, and so on– at the expense of the social contract, or the “spirit of a deal.” Going well beyond a good working relationship, the social contract governs people’s expectations about the nature, extent, and duration of the venture, about process, and about the way unforeseen events will be handled. Especially in new ventures and strategic alliances, where goodwill and strong shared expectations are extremely important, negotiating a positive social contract is an important way to reinforce economic contracts. Scurrying to check founding documents when conflicts occur, which they inevitably do, can signal a badly negotiated social contract.
1. The Harvard School Publishing Guide to Smart Negotiations