IVAN HOFFMAN, B.A., J.D.
A successful entrepreneur controls the agenda. Controlling the agenda means establishing or redefining the subject matter and tone of the discussion and negotiation and in the process, causing the other party to respond to your agenda. It is often the key to success especially in today’s complex business environment. This is the “day of the deal,” the “private law,” and knowing how to make deals is far more important today that perhaps at any other time in our business history. (Read “Private Laws”)
Every deal in the history of humanity has been made on the basis of who wants who more (W3M). W3M means that you recognize the strength, or indeed weakness, of your bargaining position in a negotiation. If you are coming from strength, W3M means that you seek to increase that strength without at the same time driving the other party into the ground. If a deal does not work from both parties’ standpoint, the deal will not work for either party since the party that is at a distinct disadvantage will always seek to get out of the deal or at the very least, be uncooperative in its execution. If you are coming from weakness, W3M means seeing how you can leverage some of what power you do have into a stronger position. It also means that in any negotiation, it is vital to know and understand the other party’s strength and weakness and to try and understand the deal from that other party’s standpoint so that you can then be in a position to co-opt any negotiating tactics that other party might throw into the mix.
In order to control the agenda, no matter from which side you initially come, you must actually understand the nature of the deal and I am often amazed at how few parties actually know what the deal is about because they do not see it with vision. Seeing a deal with vision requires a party to see a deal from the broadest point of view instead of merely the immediate intent of the transaction. (Read “The Need for Vision” and “What Business Are You In?”)
I mentioned in the opening paragraph that controlling the agenda is one way of either establishing an agenda or redefining it. Clearly, if the dynamic initially favors you in the negotiation, in other words if the other side wants you more than you want them, then controlling the agenda enables you to maintain that dynamic. While this may seem self-evident, I am often amazed at how few people actually know their advantages and in turn know how to exploit them. Often as not, a party that fails to know their strength will “give away the store,” meaning that they will lose that strength through a failure to understand it. They will allow the other party to control the agenda that initially favored the stronger party. A double “whammy” since they will have lost what they had and additionally give their power away to the other party.
On the other hand, often what appears to be a dynamic in which you want the other side more than they want you can be reversed and the dynamic put in your favor if you are a skillful negotiator and know how to create a new dynamic by creating a new agenda. In order to do this, however, you need to recognize the source of your strength, your competitive advantage. Competitive advantage means what you bring to the deal, the value that you have to the transaction, the reason there is a deal in the first place and your place in that deal.
[This article and these ideas of course are about arms-length transactions and are not about situations in which one party is responsible for protecting the interests of another party, such as in a fiduciary relationship.]
Sources of Strength
In order for the negotiator to understand W3M, who wants who more, it is always essential that the negotiator know the relative legal rights and obligations involved in the transaction. If the law and the facts favor one side over the other, then clearly the negotiation favors that party. But if the negotiator does not even know what the law grants or requires, the negotiator can never even get to a position of strength or may lose it through ignorance. And since clearly not all negotiators are skilled in the law, the true entrepreneur knows when it is appropriate to not try and be one’s own lawyer. The Do It Yourself Lawyer is highly inappropriate in all negotiations but especially in today’s convergent, multimedia, complex legal environment Internet world.
But it is not merely a knowledge of legal rights and duties that are relevant to the negotiation process. Many times, a party is simply not aware of what value they bring to the negotiating table. I have represented both the business as well as the creative end of the deal throughout all of my practice, some 26 years now. I have often found that the creative end often simply fail to believe in themselves, in their art form whatever it may be, enough to appreciate their uniqueness and that that uniqueness is of value. (Read “Set To Fail”)
On the other hand, the “money” end of the deal-making process often times also fails to appreciate what they offer to the deal and often times ends up making bad deals because they lack this sense of value.
The other significant source of strength in any negotiation is recognizing one’s own lack of strength. Today’s Internet world has created a paradox. On the one hand, the opportunities to be an entrepreneur teem today as in no other time. Putting up a web site is within the reach of virtually everyone with an idea. On the other hand, there is also a great gap in entrepreneurial skills. Simply because there are these opportunities does not mean that everyone who sets up shop has the skills to become successful at it. And because there are so many opportunities, there is a need to learn skills that you may never had had a reason to learn before. The sheer volume of new business opportunities appears to have created a volume of potential business failures since there are simply more attempts. There may not be any statistics available as yet to determine “Internet business failures” but I would assume they are quite high.
Let me give just a couple of specific examples of what all this generalized information is about. Keep in mind that in any given deal, what “controlling the agenda” may mean may vary considerably since each deal has to be evaluated on its own merits.
1. Submitting the Contract. The party that creates and submits the agreement immediately has the upper hand in the negotiation. By very definition, the other side must then respond to the agenda created by the agreement. The other party is then in the position of having to negotiate around the agreement, either by proposing revisions that first must overcome the inertia created by the original provisions or must choose instead to sign that agreement, pass on the deal or whatever other choices that party feels they have. But under any circumstances, the party submitting the agreement sets the tone and agenda to which the other side must respond.
2. Recreating The Original Agenda. Often the original agenda created by one side can be re-created, re-phrased so that it now becomes your agenda to which the other side must respond. This can be accomplished in a number of ways that are almost always determined by circumstances of the moment but there are some general approaches. For example, to counter the agreement that has been submitted by the other side, you can reject that agreement completely and prepare a new version. This can be accomplished if you have the bargaining power. Additionally, recreating the agenda can often be accomplished by seeing the deal from a completely different standpoint. For example, I have often seen deals in which the parties see the deal as a partnership. This vision creates one agenda. However, by repositioning the deal as a license, a new agenda is created and that new agenda may create a new set of bargaining positions that may favor one party over the other.
3. Making Yourself Essential. If you are to be protected in any deal, if you are to have some control over the agenda, you must actually be part of the flow of the deal. You must integrate yourself into the transaction in such a way that the transaction cannot happen without your participation. If you are peripheral, you may find yourself eased out and have no legal or business leverage to capitalize on the deal. How this is accomplished depends upon your role in the deal, especially if it is a multiparty deal.
I realize that much of this may seem vague because there must be the specifics of the particular deal in order to quantify these statements. The important point here is that the reader recognize that there is *always* an agenda and the party that fails to recognize that there is *always* an agenda seems destined not to control that agenda. Failing to control the agenda or even failing to recognize that there is even that agenda puts that party at a significant disadvantage right from the start, a disadvantage that may be permanently lost.
Deal making is an art form, a skill set, like many other art forms and skill sets. Failing to recognize this and one’s own lack of skills in this area is also part of losing control of the agenda. Do what you do best and seek out others to do what they do best. We are in a world of specialization. The generalist, the be-all, do-all person of the 19th and even early 20th century seems a dinosaur in this time.
© 2000 Ivan Hoffman