Tuesday, November 02, 2004

Dealmakers and Value Creation

Don't miss the article on dealmakers and value creation by Danny Ertel. He writes in the Harvard BR of November 2004 that most competitive runners will tell you that if you train to get to the finish line, you will lose the race. To win, you have to envision your goal as (just) beyond the finish line so you will blow right past it at full speed.

That makes good advice for managers, especially when you're dealing with complex negotiations such as in alliances, mergers, acquisitions and outsourcing. In corporate finance it often pays out to make sure both parties interests are aligned, even if that means leaving some money on the table. The most expensive deal is the one that fails... A dealmakers attitude can be killing for long-term value creation. Ertel provides five tips that can help a negotiation team to work with the right (the-real-value-is-created-during-implementation) mindset:

  1. Start with the end in mind
  2. Help them prepare too (surprising or overbluffing the other side does not make sense)
  3. Treat alignment as a shared responsibility (if your counterpart's interests are not aligned, it's your problem too)
  4. Send the same one message to both implementation teams
  5. Manage negotiation like a business process (prepare in a disciplined way and conduct post-negotiation reviews)