Business Negotiation September 9, 2015

Internal Agreements Are Only Promises Subject to a Discount Rate

A promise is a concession with a discount rate. Some are worth little, others at par or better. Much depends on the character of those making the promise and the situation or environment surrounding the participants. Added to the complexity of evaluating promises is the nature of the issues or differences involved.

Why as internal negotiators should we be interested in promises and their discount rate? Because most negotiations at work end in agreements that are promises to perform rather than written commitments. Business agreements between buyer and seller are documented by signed commitment. Later, when problems or disagreements arise, they are subject to commercial law. Internal agreements that fall apart are subject to settlement only by renegotiation or appeal to higher authority.

Is there something we can do to assure that internal agreements will be honored as negotiated, or do we just shake hands and hope for the best? The answer of course is that, with careful thought and action, we can raise the probability of promised performance, not guarantee it.

Internal negotiators who take notes of progress and agreements at the negotiating table, and summarize them with the other party as talks progress, raise the likelihood that what has been agreed to will be done. Good notes have power in the absence of a contract and, even when there is a contract, often pave the way for renegotiating subsequent misunderstandings. Taking copious notes and saving them for easy retrieval helps reduce disputes.

Agreements that include performance milestones, progress tracking and review procedures make promises more firm. Prior good relationships between negotiators and a history of mutual dependability raise the probability of workplace agreements. It also helps if others involved in the talks participate in and witness the agreement being made.

Agreements between those who negotiate in the workplace are fragile and prone to change and misinterpretation. In the end, the character and reputation of the persons promising performance and the stability of their respective organizations play a large role in determining its discount rate and present value.