Tracking Your Progress In A Negotiation By Using A LOI Or MOU

by drjim on May 13, 2016

A LOI or a MOU can help to keep a negotiation on track

A LOI or a MOU can help to keep a negotiation on track

Image Credit: Republic of Korea

More often than not, the negotiations that I find myself involved in are complex beasts that have a lot of different moving parts. It can become very difficult to keep track of all of the different parts so that I understand what still needs to be worked out. The good news is that this is a very common problem in negotiations. This means that there is a solution for this challenge: a letter of intent (LOI) and a memorandum of understanding (MOU).

What A LOI And A MOU Is

A modern negotiation is a complicated thing for even the best of us. The number of issues that need to be discussed and the number of people who may eventually be involved in the negotiations can make it very difficult to stay on top of exactly what is going on. Because knowing where the negotiation is at all the time is part of our job, we need to find a way to help us stay on top of what is going on. This is where LOIs and MOUs come in to play.

Generally speaking, most negotiations are not that much of a surprise. Before they even start, we pretty much know what we are getting ourselves into. When we take a look at what will be covered during the negotiation, we can spot the complex negotiations that will take a long time from the simple ones that we should be able to wrap up in a day. A letter of intent (LOI) is a document that we can prepare before we get started with one of the complex negotiations. This simple document lays out what we believe that we’ll be negotiating. By signing the LOI, the other side is agreeing that what has been documented will provide the boundaries for upcoming negotiation.

Getting an agreement as to what we’ll be discussing before all of the negotiation styles and negotiating techniques start to get used is always a good idea. However, we all know how things tend to go – they can get very tricky very quickly. It can be easy for a negotiator to lose his or her way half-way through. This is where a memorandum of understanding (MOU) comes in. At any point in the negotiations you can call a halt to what is going on and then use your knowledge of where things currently stand in order to create an MOU. The other side will review the MOU and if they agree that it accurately summarizes where things currently stand, then they can sign it. An MOU is a non-binding document that simply states where things currently stand in a negotiation.

How To Use A LOI And A MOU

Now that we know what an LOI and an MOU are, how should we go about using them in our next negotiation? The most important thing to keep in mind might be to understand what they are not. They are not intended to be used as legal documents. The final result of your negotiation will be a legal agreement that will be drawn up probably by lawyers and it will be written in that legal speak stuff.

An LOI and MOU are not intended to replace the function of the legal documents that are a part of every negotiation. Instead, they are simply designed to allow everyone to agree on where the negotiations are at a given point in time. What this means for both you and the other side is simply that you are not going to want to try to write your LOI and MOU in “legal speak”. Instead, you are going to want to write them in clear-cut language that everyone is going to be able to understand. Do take care to make sure that what you write can’t be interpreted in multiple ways!

If it’s clear that an LOI should be used prior to starting a negotiation, then just exactly when should an MOU be used? I really only plan on using a MOU once during a negotiation if at all. This means that I need to plan out when I’ll use it. Generally speaking, when I feel that both sides have reached a number of critical agreements and that the end of the negotiations is in sight, this is the right time to use the MOU. I feel that the MOU serves to remind both sides of just how much has already been worked out. By using the MOU to identify what remains to be worked on, I’ve found that I can direct the other side’s attention and prevent any stepping back and having to renegotiate things that have already been agreed to.

What All Of This Means For You

Your goal when negotiating is to be able to walk away with the deal that you want. The challenge is that there are often so many different things that are going on during the principled negotiation. In order to keep track of what is going on, you need to know how to use a letter of intent (LOI) and a memorandum of understanding (MOU).

An LOI and a MOU are basically the same thing. The difference is when you use them. An LOI is used at the start of a negotiation to lay out what you’ll be negotiating. An MOU is used later in the process to keep track of what is going on. The key to doing this correctly is to make sure that the wording of both documents is complete, but not too legal.

The one thing that you never want to have happen during a negotiation is that you lose track of where you are at. Understanding what a LOI and a MOU are is the right way to make sure that you are able to keep track of where things are at. Use these tools to get the deal that you want!

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

Question For You: Do you think that you should refer to the LOI or MOU during the negotiation if things go off in a different direction?

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What We’ll Be Talking About Next Time

Negotiations are complicated things. There are often a number of different people involved, there are multiple discussions that are held over time perhaps in different locations, and all sorts of negotiation styles and negotiating techniques are used. As a negotiator, it’s your job to make sure that everything is kept in line – that everyone knows what they’ve already agreed to and what still needs to be hammered out. This is where a LOI and a MOU can step in and help you out.

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