The Importance of Setting the Rules of Engagement in Negotiation

Negotiation is often seen as a battleground where two or more parties come to the table with their respective goals, trying to extract the maximum value possible. However, one of the most crucial yet overlooked aspects of successful negotiation is agreeing on the rules of engagement right from the start. This technique, highlighted by negotiation expert Keld Jensen, emphasises the need to define how the negotiation will be conducted before diving into the actual discussions.

What Are the Rules of Engagement?

The rules of engagement in negotiation are essentially the agreed-upon framework that outlines how the negotiation will proceed. This can include setting the tone of the negotiation—whether it will be collaborative or positional—and establishing principles such as honesty, transparency, and the commitment to list all negotiable items from the outset. Think of it as defining a code of conduct that both parties will adhere to throughout the negotiation process.

Why Are Rules of Engagement Important?

1. Building Trust Currency:

Trust is a valuable asset in any negotiation. Keld Jensen refers to this as “Trust Currency,” which can significantly impact the outcome of negotiations. When both parties agree to a set of rules at the beginning, it helps build this trust by ensuring that each side understands the expectations and boundaries. Trust can lower transaction costs, reduce negotiation time, and pave the way for long-term relationships.

 2. Avoiding Misalignment:

Misalignment in negotiation often occurs when parties assume they are on the same page when, in fact, they have different understandings of the process. For instance, one party might approach the negotiation as a collaborative effort, while the other might see it as a competitive battle. By setting the rules of engagement, these misunderstandings can be addressed early on, preventing conflicts and ensuring a smoother negotiation process.

 3. Strategic Planning:

Not every negotiation requires the same approach. In some cases, particularly where long-term relationships are at stake, a collaborative approach might be more beneficial. However, in one-off, transactional negotiations where both parties have many alternatives, a more positional approach might be warranted.

By discussing and agreeing on the rules of engagement, parties can align their strategies with the context of the negotiation, increasing the likelihood of a successful outcome.

Examples of Setting Rules of Engagement

• Honesty and Transparency:

One of the simplest yet most powerful rules to establish is a mutual commitment to honesty. For example, both parties might agree at the outset that they will not lie during the negotiation and will disclose all relevant information.

• Listing Negotiable Items:

Another effective rule is to list all potential areas of negotiation from the start. This ensures that both parties are aware of all the variables on the table and can negotiate more effectively.

• Verbal Positioning:

An example might be starting the negotiation with statements like, “We are committed to a transparent and honest discussion,” or “Let’s agree upfront that our goal is to find a mutually beneficial outcome.”

Balancing Trust and Caution

While trust is crucial, it’s important to balance it with caution. Keld Jensen warns against being naive—trust does not mean blind faith. Instead, it involves being open and transparent while still protecting your interests. For instance, even when committing to honesty, it’s vital to verify the information shared by the other party.

When Might This Technique Be Less Effective?

• Short-Term, High-Stakes Negotiations:

In situations where the negotiation is a one-time transaction, and both parties have numerous alternatives, the emphasis on collaborative rules of engagement might be less effective. In such cases, parties might prioritise immediate gains over long-term relationship building.

• High-Pressure Environments:

In industries where short-term results are prioritised, such as during financial crises or in industries with rapid turnover, the pressure to achieve quick outcomes might overshadow the benefits of building trust through collaborative engagement.

The Role of Organisational Understanding

One of the key challenges in modern business is the focus on short-term results, which can often clash with the long-term value creation that a collaborative approach can offer. This is why it is imperative that negotiation is understood not just by those directly involved but by all levels of the organisation, especially senior management and board members.

A holistic understanding of negotiation can help align business strategies with long-term goals, ensuring that the organisation doesn’t sacrifice future value for immediate gains.