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Conflict Management in China - Post-Contract Negotiation


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Chinese and Western negotiators view contracts and relationships very differently. Experienced Westerners often say that the real negotiation starts AFTER the contract is signed with their Chinese counterparty.

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Conflict Management in China - Post-Contract Negotiation

  1. 1. Conflict Management in ChinaPost-Negotiation Stress Syndrome Presented by &
  2. 2. Now available on Kindle and other eBook formats: In The Fragile Bridge Andrew Hupert, publisher of ChinaSolved, shows you how to avoid conflicts in China when you can, minimize them when you cant, and manage them when you must.
  3. 3. Post Negotiation Stress Syndrome• What is the most difficult aspect of successfully completing a business deal? – Western answer: Finding appropriate counter- parties. – Chinese answer: Post-agreement implementation.• The most important negotiations in China take place AFTER a contract has been signed.
  4. 4. What’s the biggest business challenge?• We ran a pair of surveys on Linkedin recently.• One survey appeared on a set of Linkedin business groups with NO specific geographic orientation and asked, “What is the most difficult aspect of doing business?” – A second survey targeted China-oriented groups• We broke down the deal process into 5 phases:
  5. 5. What is the most difficult part?1) Finding appropriate counter-parties2) Clarifying deal terms3) Finalizing the deal – signing the contract4) Executing the agreement / doing the actual business5) Post-deal compliance & Quality Control
  6. 6. What is the most difficult aspect of doing business?
  7. 7. What about China?• A similar survey was run among China- business oriented groups that asked the same question – with the addition of 2 words. What is the most difficult aspect of doing business in China?
  8. 8. What is the most difficult aspect of doing business in China?
  9. 9. What is the most difficult aspect of doing business? Globally: Pre-Signing
  10. 10. What is the most difficult aspect of doing business in China? China: Post-Signing
  11. 11. 3 possible explanations:1. Cheats & Liars; Buffoons & Idiots2. Inappropriate counter-parties3. Just another day in China.
  12. 12. Cheats & Liars / Buffoons & Idiots ?• Whenever a cross-border negotiation goes awry both parties tend to hit the ‘cultural panic button’. – Westerners accuse the Chinese side of dishonesty. – Chinese tend to blame the Western side of being dim-witted & inexperienced.
  13. 13. Cheats & Liars / Buffoons & Idiots ?• If there were truth to this argument then few Westerners would stick around for a second attempt -- and international trade in China would collapse.• Research indicated that even among experienced, successful Western business people in China - post-signing renegotiation was the rule and not the exception.
  14. 14. Inappropriate counter-parties• In China the opportunities are vast, the culture different• Due diligence procedures are cumbersome.• References are hard to get – and harder to check.
  15. 15. Inappropriate counter-parties• The result: – Western deal-makers often hear what they want to hear in order to report good news to the home office quickly. – Chinese counter-parties tend to preserve harmony by glossing over problems and making promises they can’t keep.
  16. 16. Standard Procedure in China• Chinese negotiators put more emphasis on the relationship, and less on the contract.• Chinese businesspeople feel that as long as the relationship is intact, negotiations are ongoing.• Negotiations don’t end because they aren’t supposed to.
  17. 17. Standard Procedure in China• Experienced Westerners anticipate the post- contract negotiation, and plan accordingly.• They budget the time and resources for extended negotiation.• Prepare HQ, clients and downstream partners that the contract signing doesn’t mean the end of the negotiation.
  18. 18. Remedies for Chinese Post-Negotiation Stress Syndrome:1. Manage time differently2. Vet counter-parties carefully3. Discuss difficult details earlyEven the most careful & experienced deal-makers should plan for a second ‘post-deal’negotiation
  19. 19. 1. Manage time differently• Negotiators who fly into China with a firm timetable and a deadline for a signed contract are most likely to end up with a worthless piece of paper.• The best negotiators know that the answer to ‘how long will spend in China?’ is: ‘as long as it takes to get an agreement that is good for everyone.’
  20. 20. 2. Vet your counter-parties• Honest & reputable are vital prerequisites in potential partners – but only as a first step. – Competence and APPROPRIATE experience are what make good partners.• Avoid being anyone’s first international deal in China.
  21. 21. 3. Discuss difficult details early• Inexperienced negotiators are so sensitive about ‘building guanxi’ and ‘making others lose face’ that they fail to nail down an enforceable agreement.• Ask for references and perform thorough due diligence.• Keep smiling – but keep drilling down for details until you get 100% transparency & complete answers.
  22. 22. Final Caveat• Even the most careful & experienced plan for a second ‘post-deal’ negotiation at the execution phase. – Make sure you budget the time, expense and managerial bandwidth for the inevitable second round. – Lawyers and consultants must prepare their clients IN ADVANCE.
  23. 23. Now available: The Fragile BridgeThe Fragile Bridge:Managing Conflict in Chinese Business Developing relationshipswith Chinese partners,suppliers and clients is hardwork — but profiting fromthem can be even moredifficult. The bridges youpainstakingly built to crossthe cultural divide are morefragile than you thought.
  24. 24. www.ChinaSolved.comOctober 24, 2009