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Does Virtual Negotiation Work?

May 12, 2014

IACCM research suggests that around 80% of today’s business-to-business contract negotiations are ‘virtual’ – that is, they use technology of some sort, rather than physical meetings. The theory is that this approach cuts costs, increases efficiency and shortens cycle-times. Whether or not any of these benefits have actually occurred, I do not know – but I somehow doubt that the overall balance sheet has seen much improvement.

Researchers and academics are trying to make sense of the move to virtual meetings and when they may (or may not) be appropriate. A recent book by David Pearl suggests that creativity is one notable victim of the virtual world – ideas and brainstorming apparently flourish in a physical environment. Pearl also highlights the need for physical presence ‘when you are making important decisions or working on matters that concern the organization’s core business’.

Professor Richard Arvey adds to the list by pointing to the constraints on communication in a non-virtual environment. Not only are non-verbal cues largely lost, but attention spans waver (who is really listening during those interminable conference calls?). Team spirit and group identity also suffer, potentially undermining a sense of shared goals or objectives (an issue often critical to contract results).

Taken together, these factors suggest that many negotiations would gain from more frequent physical meetings and that many of today’s disappointing results could be improved. Certainly this is likely to apply for negotiations of strategic importance or where team consensus is essential to the outcome.

So when does virtual make sense? It appears to be in three specific types of negotiation scenario:

  1. Where the deal or contract in question offers little chance of added-value and therefore no need for creative thinking;
  2. Where the meeting is either ‘non-discursive’ or where information flows are largely one-way – for example, basic fact finding or issuing instructions on tasks to be undertaken, or setting an agenda.
  3. As a method of follow-up, for progress checks or detailed discussion of very specific points between experts.

A well-planned negotiation would take account of this need for a more nuanced approach and I am sure some experts establish the right mix. But it would be good for all organizations to be more aware of the impact of the virtual / physical choice …. and I will write more on that theme tomorrow.

One Comment
  1. Eugene P. Grace permalink

    The issue of how to perform a negotiation is an interesting one and should be explicitly addressed when making the decision to negotiate or not. The outcome of this inquiry may depend on the anticipated significance and length of the relationship. It may depend on the level of urgency attached to concluding a contract negotiation; or it may depends on the complexity or number of issues to be resolved. If, for example, you anticipate that a relationship may extend for several years, then it may be appropriate for you to opt for an in-person meeting. I preferred to visit the other party in order to learn more about their surroundings. You learn a lot by visiting your counterparty. Also, in-person meetings tend to create greater bonds with the counterparty. Typically, there are certain social aspects to the visit from which you gather more information. I wouldn’t be surprised if the counterparty returned the visit at some point in the process for the same reasons. Having met the individuals at the counterparty, the use of technology tools will proliferate. Determining the appropriate uses (or non-uses) of technology is an important preparatory step in the negotiation process. The key is for you to control the technology as opposed to the technology controlling you.

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