How to close deals and deal with conflict
In any business, partnership or joint venture, there will be conflict.
Mostly, SME decision makers will enter the fray thinking of the outcome in terms of winners and losers.
Similarly, when these decision makers enter into negotiations with a potential partner, client or supplier, the battle lines are often drawn around who will win and who will lose.
Negotiation and conflict resolution are arts of the business world and one needs to know how to play the game.
How to haggle
When SME decision makers enter into negotiations on a deal, they accept that it is a give and take situation. Usually, everyone wants to be the taker but this is simply not the reality.
Big business will always try to negotiate from a position of strength and Business Partners Executive Director, Christo Botes, says you cannot negotiate as an SME if your back is against the wall.
“If you back off continually and constantly cut your margins, you will lose the other party’s respect. Your reputation in the industry can also be adversely affected,” he explains.
“You need to stand your ground on matters of principle and never allow your integrity to be questioned.”
Jan Steenkamp, the Executive Head of Sanlam Cobalt, echoes this: “Before you enter into a deal you have to be sure of its purpose… It is natural for people to try win at all costs and get all the benefits stemming from a deal. When you try to get too much, it almost always leads to conflict.”
It is also important to be transparent and honest and you need to balance your needs and the other party’s expectations.
“Never bluff – if you create a perception that is not accurate, you will be caught out and you will lose your credibility.
“When you go into a deal you need to ensure that the deliverables are well defined for both parties… you need to define the end goal upfront and take the emotion out of the deal,” Steenkamp says.
It is called batna
Gibs’ Associate Professor Albert Wöcke, says whenever you enter into negotiations, you need to set a BATNA: the Best Alternative To a Negotiated Agreement.
“People think they need to compromise, compromise and compromise until everyone is happy. Or, they try to win at all cost,” he says.
Wöcke explains that once you have set your limits – your BATNA – you enter a negotiation with a sense of power. In addition, if you have set and defined limits, you will know when it is time to walk away.
He adds that not all negotiations are about possessions and that you need to identify quickly what the other party’s motives are.
In a win-win scenario, the conversation revolves around different, and congruent interests.
In a win-lose scenario, one of the players has a positional bargaining ace-card.
“Typically, you need to look at their sources of influence and your own. If it is a large company you need to look at what makes you attractive,” he explains
The deal goes south
Deals with customers, suppliers or joint venture partners will come undone from time to time and it is important to handle the situation professionally.
To Wöcke, conflict is not always a negative word and he says that it is essential to promote innovation and change – it can be a driving force in a business.
When it does move into a negative space, he says that conflict management comes down to the way you want to see the situation play out.
Wöcke explains these intentions are either competing, avoiding, compromising, accommodating, or collaborating.
In other words, you need to decide what outcome you seek through managing the conflict. You also need to decide how important the issue is versus continuing the relationship: “If you have this in the back of your mind, you can generally manage the outcome because the other party will probably respond to your approach.”
Steenkamp adds to this, saying that if the conflict is between business partners, or joint venture partners, one needs to quickly identify the true cause of the disagreement. This is because conflict often manifests itself in issues different from the true cause.
“Most business owners want to be in control and when someone starts stepping on their toes it leads to conflict. The different roles need to be defined clearly and for the benefit of the greater good of the company…
“In some cases the best answer may be to walk away but you need to be mature enough to do this in a way that ensures both parties are not negatively affected,” Steenkamp says.
When the conflict is internal, the rules do not change: “Quite often, conflict stems from emotion and personal management styles or backgrounds. If this happens, you need to improve your communication lines and try to understand the other person’s way of thinking – here an outside person can help you to remove the emotion and facilitate an open an honest conversation…
“You need top be able to listen and understand the other person’s perspective. It does not help communication if you defend your position all the time,” Steenkamp says.
Botes says that when shareholders and directors start to work against each other, it usually signals the beginning of the end.
Shares and voting rights are almost always a source of contention, as SME decision makers want as much control as possible.
Rather, he believes that a business needs a clear leader who has the casting vote in a partnership. Capital, he adds, does not automatically define knowledge or ability.
“If conflict starts to snowball, it can often be too late to save the business. You need to work at your relationship with your business partners every day.”
He adds that silent partners also often become involved in a business when things go wrong. While they did front capital, silent partners are usually not operationally involved in a business for a reason.
“It is always best to set out the relationship from the start… A good way to deal with potential conflict is to have regular meetings to update silent partners. But, do not let these meetings adversely affect the business.”
Botes adds that reverting to a shareholders agreement is only a last resort. Rather, the spirit of the agreement should guide the relationship.