Authority is important in business negotiations. After all, when you are negotiating a deal, you want to be dealing with someone who is able to see the deal through. If not, the agreement may not be enforced or may even be changed later.
It would be ideal if all parties negotiating have the power and authority to conclude a deal. However, at times, companies may send a junior executive to a negotiation, without empowering him or her to conduct business. If you are faced with this situation, it is not enough to just ask: Have you got the authority to make a deal?
As we recommend for every negotiation, do your homework before approaching the table. To deal with authority issues, Karrass recommends:
- Knowing the history of the company (or individual) as much as possible
- Having the confidence to question the level of authority
- Understanding the other party’s organizational structure
- Finding out prior to negotiation what is involved in an approval process
- Being prepared to walk out if the authority is not there
A tactic that is often used is authority escalation, meaning that one of the parties tries to pass the approval to a higher level forcing the other party to re-negotiate. It is a test of wills and power levels.
In the end, it boils down to decision-making power. As Dr. Chester L. Karrass writes:
You cannot negotiate effectively unless you think about the decision-making process of the other party.
What do you do when faced with limited authority or with your authority being questioned?