Jonathan E. Pearl
Negotiation Tactics 101: The time limit.
Quite often your negotiation counterpart will try to pressure you into doing a "quick" deal. This may be because they don't value your business and don't want to waste unnecessary time, or it may be that it is highly important to get your deal completed before other things can happen. In the latter case a time limit can work as leverage in your favour.
A slightly more sophisticated approach is when people use delaying tactics during discussions to cause pressure later. I once knew a sales-guy who, when the other side told him they had allocated 2 hours, would tell the other side that he could only stay for an hour. This forced the other side to improvise, increasing the likelihood of them making mistakes.
On the other hand a contract negotiation without any agreed deadline tend to expand to fill the time available. I recall a patent license negotiation I was involved in which lasted more than 10 years because neither of the parties was (for different reasons) prepared to bring them to a conclusion, and were concerned about the risks of applying any time pressure. Other times I have observed that negotiations that go on "too long (and /or too deep)" are often a pre-cursor to a difficult business relationship.
If you determine the pace in the negotiation, you are usually in the driver’s seat. Every good negotiator will try to push the opposite side into accepting their own time-frames. So limiting time is therefore often a popular tactic. If you think that you are likely to have a better bargaining position by delaying the negotiation - then you should do so: but first make sure you have a plausible rationale for the delay.
Some negotiators use the timing of certain issues as a way to build up pressure on the other side. The more one party has invested in trying to reach an agreement - and the nearer an impending deadline gets, the less willing he will be to abandon the negotiation. That party is more likely to make concessions that he would not have made - had he not been under time pressure. For example, a negotiator faced with an unreasonable demand only ten minutes into a negotiation is very likely to reject it, even if it could potentially jeopardise the entire negotiation. But, if the negotiation has been going for several months and significant progress towards an agreement has been made, it's much less likely that the negotiator will jeopardise the success of the entire negotiation by rejecting even unreasonable demands that would have been rejected early on.
So how should you deal with time pressures.
Always negotiate the negotiation process before dealing with substantive issues. The more clarity and commitment you have regarding the process, the less likely you are to make mistakes on issues of substance.
As a standard part of your negotiation preparation always find out the following from your own side, and (where appropriate) from the other side:
- How much time do you need to close the deal?
- What factors might slow down or speed up the process?
- Are there key milestones or dates that the parties should be aware of?
- Are there any time-dependent factors that you would prefer the other side didn't know about?
When put under any kind of time pressure, always find out as much as you can about the background to the deadline. Maybe the time-pressure is real, maybe it's just a negotiation ploy. And remember a true deadline (like the need to get a transaction completed before your counterpart's accounting period) can be party-neutral: it's possible that a deal done before the accounting period closes will be advantageous to them but cost-neutral to you. However, once the accounting period has closed your counter-party may reevaluate the entire commercial rationale for the deal - and you may lose all the concessions that you got up to that point.