Good Negotiators Know The Importance Of A Memorandum Of Agreement

by drjim on January 11, 2013

When the negotiations are done, you have to write down what was agreed to

When the negotiations are done, you have to write down what was agreed to
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Negotiations can be long, drawn-out affairs. When the final agreements have been reached, all of the negotiation styles and negotiating techniques are put away, and everyone stands up, shakes hands and leaves the room, right? No! There is one more important step in the whole negotiation process before you’re done – you need to create a memorandum of understanding.

Why Is A Memorandum Of Understanding Needed?

I can’t tell you how many negotiations I’ve seen come unraveled shortly after both sides of the table seemed to have been able to reach a negotiated agreement. What caused this deal to fall through was one simple thing: time.

When you wrap your negotiation up, you still don’t have a signed contract. Instead what you have is a verbal agreement on the major issues. What’s still missing is a written document that both sides have been willing to sign.

This causes a problem. As time slips by after the agreement has been reached over the negotiating table, people’s memory of what was agreed to (or not!) starts to change. All too soon, you’ll discover that the two parties who thought that they had reached a deal now believe that they are still far apart on a number of different issues.

How Do You Use A Memorandum Of Understanding?

This is where a memorandum of understanding comes in. This is a document that you create at the tail end of your negotiation in order to capture what the agreement is that has been reached based on how both parties currently see it.

One important point that you are going to have to keep in mind is the simple fact that you’ll never be able to capture all of the negotiation details in your memorandum of understanding – and you shouldn’t try to. Instead, what you need to focus on is documenting the highlights of the agreement – the major issues.

Let the memorandum of understanding that you create document the major issues that were agreed to. Taking the time when the negotiation has wrapped up to perform this one last step will end up eliminating a great deal of future confusion and will ensure that the deal that you’ve reached today turns into a signed contract tomorrow.

What Does All Of This Mean For You?

The negotiation definition tell us that a negotiation can stretch over days, weeks, or even months. When the final agreement has been reached, it can be tempting to walk away and let the lawyers draw up the final paperwork. Don’t let this happen!

So many different things were discussed during a principled negotiation that both sides of the table need to be reminded of what they agreed to before they leave the room. Create a memorandum of understanding that documents what both sides think that they agreed to.

There may be issues that still come up as the final paperwork is created. However, taking the time to create a memorandum of understanding will eliminate many of these issues. Do the work now and save yourself the heartache later on!

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: How detailed do you think that the memorandum of understanding should be?

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What We’ll Be Talking About Next Time

When the negotiating is over and done with and you’ve put away your negotiation styles and your negotiating techniques, it’s time to create a memorandum of understanding (MOU) that will capture what was agreed to. This all sounds nice and easy until you actually sit down to create the MOU and discover that it’s somewhat difficult. What’s the best way to write an MOU that will make both sides happy?

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{ 2 comments… read them below or add one }

RADAN TECHNOLOGIES SOLUTIONS January 11, 2013 at 9:36 pm

I liked this article. It is a good reminder to all negotiators that a handshake is good, but a signed memorandum of agreement is better. Of course this depends on the local custom which varies.

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Dr. Jim Anderson January 19, 2013 at 10:34 pm

Remember that at the end of the day, any negotiation is an agreement between two people…

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