Failures May Be A Good Strategy

When you start negotiating—to hire someone, to put a partnership together—it's human nature to want to seal the deal. But sometimes failure is more valuable than victory.

Failure to Hire
I first learned this lesson when trying to hire a VP of business development. I found an outstandingly well-qualified candidate, he interviewed well, and seemed a perfect fit. But when I started negotiating his package, things got bumpy. First, he wanted too much cash, then too high a bonus, then he announced he wanted to work from home most of the time.

Determined to secure his services, I stretched my terms, found more money, argued myself into an absurd position. But with each concession, I felt more and more uncomfortable. I didn't like the values I was seeing in action. The more we negotiated, the more I understood what it would be like to be sold to by this man and I didn't want my company to be represented by his style. So I walked away.

A few years later, I ran into the candidate at a conference. He was as nice as ever. "I'm sorry," he said, "I gave you such a tough time. It just wasn’t the right gig for me at that moment." And he wasn't the right guy for me either.

Failure to expand
I was reminded of this when working with a young company recently that had been approached about an international partnership. On the face of it, this was a good deal, with local partners bringing quality contacts and energy to the table. Theoretically, it meant expansion earlier than planned, but perhaps with less risk.

The board was less certain. There was an opportunity cost to the venture. And the business was already stretched thin. How much effort would really be involved? Sure the deal looked great, but were the risks adequately covered? As we pushed on the terms, the deal fell apart, with some ill will.

Negotiation is an opportunity to explore
Many people would see both of these scenarios as failures. I don't. Every negotiation is an exploration of tolerances, costs, values. This is your opportunity to see the other side in action and to find out what they are really like. Both parties are—or should be—learning. Negotiation is not about winning, but about framing the best relationship the right way. Sometimes that just cannot be done.

One reason so much M&A activity proves disastrous is because both parties come to the table so determined to seal the deal. Their momentum proves fatal, blinding both sides to the information that is gradually revealed. Along every step of a negotiation, you learn new information about your potential partners, their values, and their priorities. If you don't seize upon that new data and re-appraise your own position daily, you'll miss the most valuable thing on the table.