Six Habits of Merely Effective Negotiators
“Haven’t you known me and my family all my life?” “Yes.” “Haven’t I cut your grass in sum- mer and shoveled your walk in winter?” “Yes.” “Don’t you agree with all my policies and posi- tions?” “Yes.” “Then why aren’t you going to vote for me?” “Because you didn’t ask me to.” Considerable academic research confirms what O’Neill learned from this conversation: process counts. What’s more, sustainable re- sults are more often reached when all parties perceive the process as personal, respectful, straightforward, and fair. 1 The Interests of the Full Set of Players. Less experienced negotiators sometimes be- come mesmerized by the aggregate econom- ics of a deal and forget about the interests of players who are in a position to torpedo it. When the boards of pharmaceutical giants Glaxo and SmithKline Beecham publicly an- nounced their merger in 1998, investors were thrilled, rapidly increasing the combined com- pany’s market capitalization by a stunning $20 billion. Yet despite prior agreement on who would occupy which top executive posi- tions in the newly combined company, inter- nal disagreement about management control and position resurfaced and sank the an- nounced deal, and the $20 billion evaporated. (Overwhelming strategic logic ultimately drove the companies back together, but only after nearly two years had passed.) This epi- sode confirms two related lessons. First, while favorable overall economics are generally nec- essary, they are often not sufficient. Second, keep all potentially influential internal play- ers on your radar screen; don’t lose sight of their interests or their capacity to affect the deal. What is “rational” for the whole may not be so for the parts. It can be devilishly difficult to cure the re- verse Midas touch. If you treat a potentially co- operative negotiation like a pure price deal, it will likely become one. Imagine a negotiator who expects a hardball, price-driven process. She initiates the bid by taking a tough preemp- tive position; the other side is likely to recipro- cate. “Aha!” says the negotiator, her suspicions confirmed. “I knew this was just going to be a tough price deal.” A negotiator can often influence whether price will dominate or be kept in perspective. Consider negotiations between two companies trying to establish an equity joint venture. Among other issues, they are trying to place a
people, they reject the spoils as unfair, are of- fended by the process, and perhaps try to teach the “greedy” person a lesson. An important real-world message is em- bedded in these lab results: people care about much more than the absolute level of their own economic outcome; competing interests include relative results, perceived fairness, self-image, reputation, and so on. Successful negotiators, acknowledging that economics aren’t everything, focus on four important nonprice factors. The Relationship. Less experienced negoti- ators often undervalue the importance of de- veloping working relationships with the other parties, putting the relationships at risk by overly tough tactics or simple neglect. This is especially true in cross-border deals. In much of Latin America, southern Europe, and Southeast Asia, for example, relationships— rather than transactions—can be the predom- inant negotiating interest when working out longer term deals. Results-oriented North Americans, Northern Europeans, and Austra- lians often come to grief by underestimating the strength of this interest and insisting pre- maturely that the negotiators “get down to business.” The Social Contract. Similarly, negotiators tend to focus on the economic contract—eq- uity splits, cost sharing, governance, and so on—at the expense of the social contract, or the “spirit of a deal.” Going well beyond a good working relationship, the social contract governs people’s expectations about the na- ture, extent, and duration of the venture, about process, and about the way unforeseen events will be handled. Especially in new ven- tures and strategic alliances, where goodwill and strong shared expectations are extremely important, negotiating a positive social con- tract is an important way to reinforce eco- nomic contracts. Scurrying to check founding documents when conflicts occur, which they inevitably do, can signal a badly negotiated so- cial contract. The Process. Negotiators often forget that the deal-making process can be as important as its content. The story is told of the young Tip O’Neill, who later became Speaker of the House, meeting an elderly constituent on the streets of his North Cambridge, Massachu- setts, district. Surprised to learn that she was not planning to vote for him, O’Neill probed,
People care about much more than the absolute level of their own economic outcome; competing interests include relative results, perceived fairness, self- image, reputation, and so on.
harvard business review • april 2001
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