Why Deals Fail
Why do business negotiations fail? Negotiations can fail for many reasons and often there are multiple reasons. No two negotiations or deals are the same. Any of these sound familiar?
- Different expectations
- Interpersonal conflict
- Cultural/ethnic differences
- Different business styles
- Different business cultures
- Different negotiation styles
- Different goals
- Looking at the goal as a distributive exercise (what one wins, the other loses)
- One side looking to win everything
- Lack of preparation
- Incorrect assumptions
- Bias
- Saving face
Amanda Friedenberg, an associate professor of economics at the W. P. Carey School of Business, recommends mediation when negotiations fail:
Mediation, Friedenberg says, can help. She explains in her working paper “Bargaining Under Strategic Uncertainty,” “Consider the case where Bargainers are trapped in a situation with a ‘bad’ set of beliefs. There are mutually beneficial outcomes. Indeed, if the Bargainers had a different set of beliefs, they would be able to obtain such mutually beneficial outcomes. But, with their actual beliefs, they each fear making such a mutually beneficial offer, uncertain how the other will react to the unexpected. One might conjecture that a mediator can be particularly effective in such a situation — helping the parties to overcome fears based on strategic uncertainty.”
“But it has to be smart mediation,” Friedenberg cautions. “A smart mediator must find ways to help the parties overcome fears of putting ‘good’ offers on the table. An environment in which the parties in the negotiation can’t use other parties’ offers to update their beliefs may be helpful. So maybe the mediator goes behind closed doors with each party and gets a signed agreement that if the other’s offer is within a given range they’ll accept.” For that to be successful, both parties must trust the mediator.