Time Is Money, Managing Time in a Negotiation Can Really Pay Off

25 March 2014 Privacy, Cybersecurity & Technology Law Perspectives Blog

In today’s global marketplace, Ben Franklin’s observation that “time is money” is as true now as ever. Companies (large and small) feel tremendous pressure to quickly line up and close deals – whether to bring in revenue, meet internal project deadlines, or to free up resources to tackle the next opportunity. Moving quickly can drive a deal forward, but speed has its price, and in many situations, slowing down may actually work to your benefit. Understanding and managing the impact of time on a negotiation can be a valuable tool. Here are some tips to make time work in your favor.

Slow Down to Create Leverage

Time, and the ability to control the pace of a negotiation, can be a powerful source of leverage in a negotiation. Customers and service providers alike can gain an advantage in a negotiation by understanding and leveraging the time pressures facing the other side. As year-end approaches, for example, many service providers are under increased pressure to get deals closed, which can give customers with time to space increased leverage to secure favorable pricing and terms. Likewise, vendors may have increased leverage in negotiations with customers who are in a pinch (perhaps due to a failing relationship with a current service provider) or are under internal pressure to hit a project deadline. If you perform a careful study of the time pressures facing the other side, you can speed up or slow down a negotiation to shift leverage to your side of the table, particularly in the later stages of a negotiation when the issues are often focused on key terms and deal fatigue may have set in.

Check Your Internal Time Pressures at the Door

Although it is important to understand the time pressures facing the folks across the table and their potential to create leverage, it is equally important to manage your own timing for your approach to the negotiations to avoid giving away your leverage or – worse yet – giving the other side a stronger position.

Consider the following: A large company and a software vendor were recently negotiating a license agreement. The large company had set internal deadlines for getting the deal done which were designed to reassure key stakeholders that the contract process would not get bogged down. Somewhere along the line, the company’s business team shared its internal deadlines with the vendor. When the negotiation hit an impasse on several large issues, the vendor dug in and knowing the company was on the hook with its leadership to close the deal on schedule, and dragged out the process to use the company’s own deadlines against it.

There are several lessons to learn here:

  1. Loose Lips Sink Ships. If you have an internal deadline associated with a deal (whether driven by a project plan for the business or a quarter or year-end closing deadline), keep your internal time constraints close to the vest. This may seem like obvious advice, but I have seen a lot of companies “overshare” their internal timing leading up to or during a negotiation, particularly during early-stage business discussions that precede the negotiations themselves. Many times, it comes back to bite them.
  2. A Blown Deadline Is Better Than A Blown Deal. The pressure to hit an internal deadline can be intense, but remember to put the deadline into perspective. If a business relationship goes south after a contract has been signed, nobody will remember (or care) that you hit the deadline; they will only be concerned with the terms you agreed to. The final stages of a negotiation often come down to several key provisions that are of particular significance to both parties – which makes it particularly important to look beyond the looming deadline and consider the long-term effect of a concession made to wrap up contract discussions quickly. One of my clients recently experienced this first hand:  facing an impending launch date for a major initiative, the company needed to finalize a master agreement with an IT services provider that would be heavily involved in the project. Negotiations dragged on as the parties disagreed over a key provision allowing the client to terminate the contract if fees rose sharply. The vendor dug in and tried to use the launch date to force a concession, but the client opted to delay the project to get the terms it required. Several months later, when the vendor’s fee estimates increased significantly, the client terminated the agreement. If it had conceded the point to close the deal and keep the project on schedule, the client would have saved a few weeks of project delay, but it would have paid a steep price for hitting its internal deadlines.
  3. Don’t Delay the Hard Stuff. I often see parties to negotiations defer discussions about difficult provisions to the end of the negotiation in order to resolve the easier terms first and narrow the remaining items in dispute. Almost every time, however, the “easier” items take longer than expected to resolve, while the big-ticket issues get pushed off until time is running out. Facing pressure to close the deal, parties have a tendency to make bigger concessions on the most important parts of the agreement. Rather than letting time drive a rushed – and sometimes fatigued – negotiation of tough provisions, put them front and center at the start of discussions and work them during the full scope of discussions. By giving yourself the benefit of time, you may be able to identify creative compromises or opportunities to bridge the gap through other parts of the contract.
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