How relevant are your existing agreements?
COVID-19 changes to work conditions, supply chains, business models and demand curves, have all contributed to a loss of relevance for many agreements. When this loss of relevance leads to dissatisfaction with how well an existing agreement is creating and distributing value, a renegotiation is often viewed as a better option than risking further deterioration, conflict and relationship strains.
What makes renegotiations more challenging?
At its core a renegotiation seeks to correct and rebalance inequities that have arisen in an existing agreement. If left unchecked, these inequities can cause a sense of loss and a focus on allocating those losses, rather than the co-creation of value that is better for both parties. Adding further difficulty can be a preparedness by those involved to accept a sub-optimal outcome because the sunken costs in the relationship make walking away more difficult.
How do you enable win/win renegotiations?
A collaborative starting point is to recognise that those involved in the original agreement were unable to predict how a future crisis like COVID-19 could fully impact on, and change, an existing agreement’s relevance. Commencing the negotiations with a more neutral and mutual framing helps to encourage the conditions for a joint problem-solving opportunity.
To further build rapport, and to help get discretionary effort, focus on the knowledge that has been gained about each other and the common ground that gives the relationship unique strengths. With a workable rapport in place, consideration can then be given to managing the ‘discovery’ stage of the renegotiation. To help co-create value, find multiple issues to discuss. This will increase the probability of revealing differing preferences on some issues by those involved, which may in turn result in exchanges that rebalance and add relevance to a renegotiated agreement.In renegotiations, the other party might also feel vulnerable to changes in the balance of power, and as a result come with defensive and competitive behaviours. To help them to mirror collaborative behaviours, monitor your voice tone to be calming, and connect with questions in a way that demonstrate empathy and a situational understanding, which in turn will reduce their anxiety. For example, you could ask, ‘To know you have been listened to and understood, how should we manage our discussions?’. To further strengthen the commitment and focus towards each other, also consider the benefits of agreeing to an exclusive renegotiation period. This will help to build process predictability and information sharing, whilst also signalling that the inequities that are being incurred with the existing agreement will not be ongoing.
Quick tips – Managing Renegotiations
- Reassess the effectiveness of contingencies that were used in the existing agreement to manage future uncertainties.
- Remember that collaboration requires flexibility, inclusiveness and accountability, so carefully consider correcting any existing relationship norms that hinder collaboration.
- To help define fairness, jointly establish an objective criteria, standards, precedents or sets of principles.