How Important Is Building Trust in Negotiating Agreements?

Answer

Nowadays, it is difficult to make a deal if there is no trust in negotiations. Even if a negotiator manages to make such a deal, it will be very challenging to implement it. Building trust is essential in any meaningful long-term relationship. In business, this is regardless of whether you're selling, buying, or resolving conflict. Most deals, even one-time deals, have consequences in the future. Roger Fisher wrote about the importance of trust, and principled negotiation is largely based on trust. So, I would think that your quoted sentence should be viewed in the context in which it was written.

Yes, I would expect that Roger Fisher, in books like Getting to Yes, was contrasting an agreement based purely on trust without a contract versus an agreement that was written up in a contract. Our preference is to have an agreement based on trust that is written up in a contract. So, the best of both.

Worth noting is that Roger Fisher is not noted as having expertise in cross-cultural international business negotiations. A contract is important in countries with a strong and efficient judicial system. So, a written contract in China or India, for example, would be far more difficult to enforce than a contract in the USA, for instance. So, a relationship becomes comparatively more important to a deal being implemented in China and India.

Trust in Relationships

It's worth discussing how trust is fostered. An important element is the authority of your word and the credibility of your actions. It's better to say what you know than not know what you're saying. Agreements are difficult in the absence of mutual respect and reliability. Both private and business life are full of examples where the future depends on the quality of relationships. For instance, marriage is a relationship; with a lack of trust, respect and faith in our partner, marriage becomes nothing but an empty agreement. A trusting business relationship is similar.

There are interesting situations, like hostage negotiations, where the negotiator will use sincerity and reliability as the building blocks of trust. As a hostage negotiator, you cannot let yourself play a dominant and even aggressive role, controlling the situation. Or you can become an ally and empathise with the hostage takers. The dynamics of each relationship are very different. Hostage negotiators need to be versed in both approaches.

Unexpected situations confront businesspeople on a regular basis – situations that would have been difficult to foresee at the time of drawing up an initial agreement. A solid foundation of trust may be the only link to resolving the issue. Given the choice of negotiating with an untrustworthy party, people with other alternatives will generally exercise these alternatives.

Securing an Agreement

Building trust requires time and even some risk, especially when we start a new partnership or business relationship. If you don't fully trust each other, find ways to minimize your vulnerability and thus reduce the risk of your negotiation failing. There are several ways to secure agreements in the absence of trust. These include setting up monitoring regimes, creating guarantees, and proceeding incrementally. There is a need for trust to facilitate sharing information with the other side. The most value-creating agreements are those in which both sides openly share data.

The result of studies by the consulting firm A.T. Kearney showed that trust in high-level business alliances is of particular significance. A direct correlation exists between trust and profit. This means that if you consistently share data with clients, not only will trust go up, but so too will the quality of your agreements – and with these, your profits. It may take several meetings to develop this trust, but it will pay off. Developing trust has become a key source of sustainable competitive advantage. Once trust is built, keep in mind that it is much easier to spoil it than create it.