Brinksmanship is the practice of waiting until the end of a business negotiation—or even after a deal is closed and delivery of goods or services is underway—to demand a concession such as a lower price or different product configuration. Unless the other party agrees, the brinksman may threaten to call the deal off.
"Brinksmanship isn't merely making an aggressive demand," explains Michael Wheeler, who teaches negotiation at Harvard Business School and in an online Negotiation Mastery course. "Nor is it declaring, 'Take it or leave it.' Those are just hard-bargaining tactics. Instead brinksmanship is putting yourself in a position meant to force the other side to blink in order to avoid catastrophe for everyone—you included."
Brinksmanship in Business Negotiations
Wheeler likens brinksmanship to a business version of a game of chicken. It can be found anywhere from high-stakes geopolitical situations to the more ordinary practice of settling lawsuits on the courthouse steps. In most cases, brinksmanship is more likely to be introduced by the more powerful party in a negotiation. That makes knowing how to respond to it more important to smaller companies.
Juli Smith, who heads an executive search firm in Jackson, Michigan, recalls the first time she encountered brinksmanship. A civil engineering firm owner retained her to find a job candidate, interviewed the candidate and then declined to pay the negotiated fee. The high-handedness of the move personally offended Smith, and that emotion guided her response.
"It did not go well," she says. "I took a hard line and so did he and the candidate was the casualty because he didn't get a job that he wanted."
[pullquote showtweet="false" username="Michael Wheeler" alignment="center"]When you practice brinksmanship, you're putting your fate in the other party's hands.
—Michael Wheeler, professor, Harvard Business School[/pullquote]
Since then, when similar situations arise, Smith says she's navigated them more successfully when she avoids emotion and tries to learn why the other party is demanding a last-minute concession.
"Ask questions and try to get an understanding of the reasons why," she advises. "Don't be afraid to ask for future concessions on the next deal. Maybe the client is in a cash-flow crunch and you just need to get creative. Remaining flexible and removing the emotion from the negotiation has saved many relationships."
Negotiating Out of a Brinkmanship
Dallas mediator John DeGroote says Smith is wise to ask why the other party wants a change. For instance, a purchasing agent might want a lower price on a shipment not because of his company's cash flow problems, but because his production department offers him a financial incentive for saving them money.
That brinksman may be open to negotiating almost any other terms of the deal in exchange for the price cut. A commitment for future orders, even an exclusivity agreement could be on the table, DeGroote suggests.
DeGroote recommends getting creative when considering what to ask for in exchange for satisfying a brinksmanship demand. A seller could ask the buyer to accept a shorter warranty, do a cooperative business advertising effort, join in a new product launch, supply marketing research or pay off accounts receivable sooner. Once you know what is driving the brinksman, DeGroote says, you may be able to make a deal that could ultimately be better than the original.
However, before asking what the other side wants, DeGroote advises carefully examining your own wants and needs.
"First and foremost, take stock of where you are," he says. If there is no way you can walk away from the deal, you may not be able to negotiate at all unless you are willing to take the risk of bluffing. But if you have some flexibility with regard to price or terms, you could be able to work with the brinksman.
Next, DeGroote suggests, set emotion aside. "You have to focus on the transaction and the parties and your relationship going forward," he says. It may be that you don't care about the future relationship, perhaps because you don't expect another order from the other party no matter what happens. But if you do want to continue the relationship, it's important to keep your emotions in check.
In addition to being more likely to occur when there is a power imbalance, brinksmanship can also occur when the parties don't have a solid longstanding relationship. If you're heading into a negotiation with a new or more powerful customer, DeGroote advises preparing in advance to fend off brinksmanship should it crop up.
One advance move that can help is to build in a cushion in the form of a higher price. You could also reserve some flexibility on delivery dates, product configurations, warranties and other terms of the deal as you negotiate. This can help give you some wiggle room if the customer demands a last-minute change.
It can be tempting for a business owner to consider practicing brinksmanship as a way to save money or improve terms from a supplier. However, Wheeler advises caution. "When you practice brinksmanship, you're putting your fate in the other party's hands," he warns. "Think twice about whether they will act wisely."
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