How Not to Negotiate with the Chinese Franchisor

1. Western negotiating tactics can have unforeseen - and unfortunate - results when employed with Chinese counterparties.

China's macro-economy is certainly slowing, but the frequency of Chinese-Western negotiation has been on the upswing as more and more Mainlanders with Money (MWMs) start investing, spending and relocating to North America and Europe. Western negotiators may be eager to transact with a new set of potential buyers and partners from China, but American and European sellers have to be aware of cultural barriers that can drive away business before they even know there is a problem.

Good Cop- Bad Cop (GCBC) is a common bargaining tactic that can drive an otherwise promising international deal off the rails. GCBC can be a very effective technique both for buyers and sellers, and is a standard part of the American business repertoire (it shows up often in the UK as "Mutt and Jeff").

For those unfamiliar with the tactic, a negotiating team takes on opposing roles - one person is the aggressive, irrational and vaguely threatening "bad cop" while the partner takes on the role of reasonable and rationale "good cop". The problem is that the tactic is loaded with social and cultural meanings that don't translate well - particularly when the counterparty is from China.

2. "Good Cop - Bad Cop" is Not Universal

The general pattern of GCBC is to split the negotiating team and deploy the bad cop - Terrible Ted in our case - against Bud the Buyer. A typical scenario is for the GCBC team to make their initial contact together and then for Nice Ned (good cop) to excuse himself or be called away.

Once Terrible Ted is alone with Bud the Buyer, the bad cop's aggressive and menacing nature surfaces. Nice Ned's role is to provide relief - and he returns to the negotiation just in time to rescue Bud and act as the voice of calm rationality. In many instances, Ned will physically restrain or block Ted and send him away. In the Western scenario, Good Cops are the savior, the protector, the rescuer in times of distress - and the tactic often conjures up at least vague notions of verbal threats or even physical harm.

Bud the Buyer is expected to team up with Nice Ned to neutralize and escape the attack of Terrible Ted. Bud gets relief and protection from a recurrence or continuation assault of bad cop Ted - who has already attacked once and behaves irrationally and threating. Bud is relieved and forms a bond of trust and gratitude with Ned - and the two friends quickly agree to deal terms.

3. Chinese Don't Find "Bad Cop" Amusing

Chinese negotiators don't use Good Cop - Bad Cop. The threat of violence (even if it is verbal) deployed directly against counterparty outside the organization isn't considered funny or light-hearted. If a Chinese person is menaced or intimidated it tends to trigger cultural responses different from those in the West.

At the mild end of the spectrum, Chinese will feel embarrassed or disturbed (loss of face or mianzi) but the specter of institutional force can have far greater repercussions in China - where "Bad Cop" has a much deeper and more sinister meaning. A Chinese negotiator who is confronted by an aggressive and menacing counterparty is likely to withdraw from the negotiation completely and cut off all future contact with the organization that employs the bad cop.

Good organizations don't deploy Bad Cops in China - where harmony and surface appearances are valued highly.

4. Henpecked Husband and Tough Lihai Wife

But, China does have its own version of a negotiating team, but the function is completely different from Western versions. Anyone who has ever spent time shopping in Chinese family businesses is familiar with the henpecked husband and the tough (lihai) wife. Poor Paul and Lee Hai the Tai Tai (the tough wife) seem to mirror the Western Good Cop - Bad Cop, but there is a significant difference.

In China, the violent, aggressive behavior is not directed at the counterparty, but rather gets directed within the team or organization. Lee Hai terrorizes Poor Paul - and Bud the Buyer has the role of savior and rescuer who must protect Paul from mistreatment within his own house. Lee Hai is only a threat to Poor Paul - and Bud is expected to make concessions and compromise on deal terms in his role as benevolent, powerful buyer.

The Chinese side is elevating Bud's stature, giving face - and appealing to his sense of noblesse oblige to persuade him to buy more, faster or at higher prices. Poor Paul is an object of pity whom Bud has the power - and duty - to protect.

Larger Chinese corporations have co-opted the Henpecked Husband - Lihai Wife dynamic by substituting the absentee owner or overscheduled boss as the internal threat. The Chinese salesman or purchasing agent will blanch at your offer, shaking his head and confiding that his boss would punish him mercilessly if he even takes that offer back to the office.

Once again, you are given face and status - but are being pressured to make concessions due to your position of power and security.

5. Chinese Negotiators React to GCBC Well

Not only do the tactics have different goals, but the impact on the counterparty is completely different.

In CGBC the outside counterparty is facing the high pressure, aggressive actor right away. To Americans with experience and relatively high tolerance to pressure tactics, the entry of the Good Cop is a relief and a return to balance. We view the Good Cop as "normal" and equal to us in terms of temperament, power and outlook, while Bad Cop is the aberration and outlier. We are accustomed to institutional give and take. We view organizations as manageable, malleable to some degree, and transparent. Otherwise we have the choice of walking way.

If the counterparty is Chinese, then once the Bad Cop makes his appearance the damage is permanent and the game is over. In China, face and guanxi undermine the whole GCBC scenario. Aggressive, irrational behavior is not a cultural norm among harmony-conscious Chinese, and once the Bad Cop starts making threats the negotiation is lost and withdrawal is the only reasonable option.

Chinese institutions are a law unto themselves, opaque and ultimately unmanageable.

Those with power and connections never encounter the Bad Cop. Successful negotiation in China is not about relief or being saved - it's about avoidance. Once Bad Cop starts shouting and threatening, the Chinese side has already lost face and been humiliated.

Poor Paul instead appeals to the Bud the Buyer to rescue HIM from Lee Hai - the Tough Wife / Bad Cop. It's a passive aggressive manipulation - Poor Paul is giving face and placing himself in a subordinate role. This pressures you to make concessions in your role as the high-power actor. You gain face - but lose deal points. As a result you are speared any contact with Lee Hai.

6. Western Negotiating Tactics: Too Muscle-Bound for Chinese?

Westerners believe that strength and success go hand in hand when negotiating, but Chinese are adept at negotiating from positions of weakness . As more Chinese buyers and partners start knocking on American and European doors, Western negotiators might want to re-think some of their tried & true tactics. Bluffing, posturing, and positioning work well with local counterparties, but may have unintended consequences with Chinese negotiators.

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