The Best Way to Manage Mistakes at the Business Negotiation Table
Imagine that you are in a sales negotiation. As part of your services, you will create a solution for an inventory problem that your customer is having. In the middle of the negotiation, a member of your team tells you that this solution can only be implemented manually, which will drive up the cost $250,000. What do you do?
- Omit the solution in the next agreement draft and hope the other side forgets the whole thing.
- Tell the other side that you’ve made a mistake, but you will absorb the cost of the additional $250,000 since it was your mistake.
- Immediately notify the other side, apologize for this mistake, and tell them that if the solution is still of value to them, $250,000 will have to be added to the price.
- Say nothing and eat the additional $250,000.
- Keep silent. Add the $250,000 to the price and address the issue at the very end, and only if the customer brings it up.
We conduct negotiation training exercises such as this with our clients, but sometimes not even the best negotiation training can prepare you for all the tough, pressure-filled situations you will encounter. In this instance, the third choice is probably best.
The fact is this: Almost everything we do in a negotiation effects either credibility or leverage in some way—usually both. That’s why you have to prepare and manage information thoughtfully.
Negotiation will present you with difficult issues regarding subjects you would rather not have to discuss. Yet, everybody makes mistakes. The difference between negotiations that end successfully and those that do not is often a result of how you manage mistakes. In this case, explaining the mistake is critical to maintaining integrity. And you don’t have to be “punished” for the mistake by giving away the $250,000.
In our negotiating programs, we teach that it’s usually best to admit mistakes sooner rather than later. If you focus on the merits of the deal and confront mistakes quickly, you should be on firm ground. If you make a mistake, don’t be afraid to admit it promptly. When you try to hide mistakes, their discovery later will jeopardize your credibility and a successful outcome. Making mistakes can damage your credibility in the short term. Hiding them for later discovery damages your integrity for the long term. Politicians from Nixon and Clinton to Sarkozy have discovered this; lying and coverups can be much more costly than any admission would have been.
Is the other side going to give you a hard time because you made a mistake? You should expect them to try to erode your Negotiation Capital—the term we coined to describe the amount of willingness by either side to negotiate and exhibit flexibility in bargaining. Think of it this way: Negotiation Capital is like currency. If you have a good relationship and have done a good job persuading the other side (creating leverage), you have earned Negotiation Capital. This “currency” translates into the other side’s willingness to move closer to your way of thinking. If you lose credibility or have to backtrack due to mistakes, then you use Negotiation Capital as if you were “burning” currency. This loss of currency should be momentary; after all, the other side is not perfect either. However, it is exacerbated if they also have good reasons to doubt your integrity because you tried to hide the mistake. You will have to work much harder to earn back your Negotiation Capital.
If you want people to accept your ideas, you must be respected and trusted. People don’t listen just to your words; they also focus on you. Taking ownership for errors that occur is a good way to build integrity and preserve your chances for a good deal, even when you slip up.