Monday, January 1, 2007

Managing Conflict

After years of supplying fuel and lubricants to operators of medium-sized fleets of trucks, Foster Fuels decided to expand its offerings to include engine coolant, procured in bulk from a rep- utable manufacturer. Foster approached its existing customers, in- cluding Robert Wood of the Wood Construction Company. Wood operated a fleet of over one hundred dumptrucks, loaders, and other vehicles. Chuck Foster had supplied Bob Wood for seven years, and the relationship had been cordial. Things changed fast after Wood’s decision to buy the coolant and install it in half his fleet. The vehicles with the new coolant be- gan to experience engine problems, including leaky cooling hoses and corrosion of metal fittings. Because only the trucks with the new coolant were affected, Wood blamed it for his problems. Ul- timately, his mechanics found such severe damage in twenty-one vehicles that their engines had to be replaced. Thirty-five more had the coolant flushed and replaced and new hoses and fittings installed. Only time would tell whether there was internal dam- age to their engines. Wood calculated the costs of this debacle—replacement and maintenance costs, lost business, and damage to existing con- tracts—at close to $450,000. He sent a bill for this amount to Chuck Foster, demanding payment for the damages. Foster retorted (accu- rately, it later emerged) that none of his other customers had ex- perienced coolant problems and suggested other possible causes, 159 160 BREAKTHROUGH BUSINESS NEGOTIATION such as other chemicals used by Wood’s mechanics or some unusual interaction. Enraged, Wood threatened to sue and to tell others about Fos- ter’s irresponsibility. Foster replied that he would sooner roast in hell than take the blame for Wood’s problem. Wood terminated his contract with Foster, found a new fuel- and-lubricant supplier, and sued for damages. He also told his story to other Foster customers, leading two of them to break with Fos- ter. Foster countersued for the cost of lost business and damage to his reputation. Foster also informed his insurance company, Mutual Fidelity. His policy was such that the insurance company would pay any damage award less than $250,000. Mutual assigned the case to an adjuster, who engaged the services of a lawyer. The lawyer told Foster that Wood’s case was weak and advised against agreeing to a negotiated settlement. The contract between Foster and Wood required nonbinding mediation prior to going to trial. An experienced commercial me- diator, Dwight Golann, met separately with the parties and found both to be deeply dug into their positions. After a joint meeting with the parties to set the agenda and lay the groundwork, Golann set up proximity talks: the parties sat in adjoining rooms and he shuttled between them. This approach avoided further escalation and allowed him to control commu- nication. Golann emphasized the costs in time, money, and ag- gravation of going to court and then probed the positions and interests of the two sides. After several hours of back-and-forth discussion, Golann con- cluded that neither side was being realistic about what would happen if the case went to court. Wood’s case was stronger than Foster was willing to admit, but weaker than Wood believed it to be. Wood’s damage claim was also out of line. If the lawsuit went Wood’s way (a fifty-fifty proposition, in Golann’s opinion), he pre- dicted an award in the range of $290,000. That outcome would mean that Foster would be out of pocket about $40,000, plus the time and aggravation of the lawsuit and damage to his reputation. Golann suspected that the Mutual representative assessed the sit- uation similarly, but saw little risk in taking a hard line. If Foster won, Mutual would pay nothing other than the remaining cost of defense (estimated at $25,000). If Foster lost, Mutual’s liability would be capped at $250,000. Golann narrowed the gap between the parties but failed, after six hours of discussion, to get them to agree. He then took a chance and offered them his own assessment of what would happen at trial. Golann told Wood that he had a 50 percent chance of winning and that if he won, the award would be in the $300,000 range. If Wood lost, he could be liable for the lost business Foster had suffered, plus the cost of the suit. Wood responded by offering to settle the case in the $200,000 range if Foster dropped his countersuit. The conversation with Foster and the lawyer for Mutual Fi- delity proved more contentious. The lawyer rejected Golann’s pre- diction of the outcome, and Foster appeared to realize that he and Mutual Fidelity had differing interests. Foster offered to settle and to drop his countersuit provided that the damage award was less than $250,000, he did not have to admit liability, and Wood agreed not to discuss the case with anyone. Golann took another chance and put a package on the table: a settlement of $190,000, withdrawal of Foster’s countersuit, and a commitment by Wood not to discuss the case. When Mutual Fi- delity’s lawyer protested, Golann reminded him privately that if he refused to settle and the trial went against Foster, Mutual could well be sued. After several hours, Mutual agreed to pay Wood $175,000, and the case was settled. UNDERSTANDING SIMPLE DISPUTES The starting point for managing conflict is to understand the dif- ference between a simple dispute and a self-sustaining conflict sys- tem. Although unpleasant, the dispute between Foster and Wood was essentially a simple one: it proceeded relatively smoothly from MANAGING CONFLICT 161 162 BREAKTHROUGH BUSINESS NEGOTIATION eruption to a definitive resolution. Later in this chapter, we will look at an example of a self-sustaining conflict at Seneca Systems. The Phases of a Simple Dispute According to Jeffrey Rubin and his colleagues, simple disputes like the one between Wood and Foster proceed through distinct phases of escalation, deescalation, stalemate, and settlement, as outlined in the table below. 1 Escalation is an often-abrupt increase in the in- tensity of conflict between contending parties. Conflict may per- sist, but its intensity typically declines; in other words, deescalation occurs. Over time, the parties may reach a stalemate in which nei- ther is able to win outright. If stalemate continues and the parties come to prefer resolution to continued contention, they will move toward a definitive negotiated settlement. 2 Escalation. Escalation is a vicious circle of provocation, reprisal, and counter-reprisal that ratchets up hostility between the par- ties. 3 The escalatory process typically begins with a provocative action (such as Foster’s insulting remark to Wood) that triggers a perception of insult or injury in another party. The injured party’s Phases of a Simple Dispute Escalation The dispute’s intensity accelerates. Other interested parties get drawn in. The issues in dispute proliferate from specific to more general and deeper grievances. Deescalation The parties act to prevent conflict from escalating further. An explicit or implicit agreement over a "cease-fire" may be reached, sometimes with the help of outside intervention. Stalemate Neither party prevails, and both realize that neither can win by force. Settlement The contending parties agree to a negotiated resolutionresponse is likely to be disproportionate—to cause more damage than the triggering event; for instance, Wood sues and encourages Foster’s other customers to withdraw their business. This stance elicits another reaction—Foster launches a countersuit—and the cycle continues to build. The conflict-spiral model of escalation is illustrated in the figure below. 4 As a dispute escalates, Pruitt and his colleagues noted, the be- havior of the contending parties changes in predictable ways: 5 • From light to heavy tactics. Foster and Wood began with at- tempts to influence each other, including arguments. As the conflict heated up, they moved to heavier tactics. Reasoned argument was replaced by insults; insults gave way to threats. Eventually, the parties turned to whatever weapons were available, including lawsuits. • From specific to general issues. The disagreement between Fos- ter and Wood began over specific issues. But as the conflict escalated, the participants invoked deeper and more global grievances. MANAGING CONFLICT 163 Disproportionate response from Party A Trigger Event Change in psychological state of Party B Change in psychological state of Party A Disproportionate response from Party B The Conflict-Spiral Model of Escalation Source: Adapted from J. Z. Rubin, D. G. Pruitt, and S. H. Kim, Social Con- flict: Escalation, Stalemate and Settlement, 2nd ed. (New York: McGraw-Hill, 1994). Reproduced with permission of The McGraw-Hill Companies. • From modest to large commitments of resources. As the conflict escalated, the parties invested more and more of their energy and resources. The decisions by Wood and Foster to launch lawsuits, for example, involved potentially very large com- mitments of money and precious management time. • From few to many participants. With Wood’s effort to pull other Foster customers into the dispute, the conflict infected and polarized the social system within which it erupted. Other parties felt pressure to choose sides, and became part of the conflict dynamic. Deescalation. Few disputes escalate completely out of control. Instead, something happens that promotes deescalation. In the case of Wood and Foster, the parties took a sober second look at their BATNAs and backed away from further provocative actions. In other cases, interested outside parties may intervene to suppress the conflict. Stalemate and Settlement. Eventually the parties may reach a stalemate and realize that no one can win through use of con- tentious tactics. If the parties are suffering unacceptable losses, the situation is a "hurting stalemate." 6 This situation may propel them to the negotiating table in pursuit of a settlement. The dispute be- tween Wood and Foster was damaging both companies’ abilities to conduct business, costing revenue, and consuming precious management time. Recognizing their losses, both decided to seek a negotiated settlement. Barriers to Agreement Just because a dispute is simple doesn’t mean that it’s easy to deal with. As a mediator between Foster and Wood, Golann had to confront and overcome several difficult barriers to agreement that can complicate efforts to resolve disputes. 164 BREAKTHROUGH BUSINESS NEGOTIATION
Overconfidence. Contending parties are prone to believe that fu- ture uncertainties will be resolved in their favor. 7 When both sides in a lawsuit believe that they will prevail in court, one and pos- sibly both are falling prey to overconfidence that tends to dis- courage out-of-court settlement. Overconfidence is a manifestation of a desire to feel competent and secure. Max Bazerman and Margaret Neale have pointed out how what they call "need-based illusions" and "self-serving biases" can contribute to irrational be- havior. 8 Loss and Risk Aversion. As we saw in Chapter Six, people tend to be loss averse—more resistant to potential losses than they are eager for equivalent gains. 9 Situations that require people to ac- cept losses—whether they involve money or power or status or territory—therefore tend to be more difficult to manage than the divvying up of gains. Similarly universal is the tendency to be risk averse—to prefer guaranteed gains to risky choices, even if the latter could yield much larger gains. Both loss aversion and risk aversion can seriously complicate efforts to forge negotiated set- tlements in disputes. Principal-Agent Issues. Differences in interests between princi- pals and agents also hinder agreement in simple disputes. 10 Think of the lawyer representing Mutual Fidelity in the Foster Fuels case: ostensibly present to advise Chuck Foster in the settlement nego- tiations, he is in reality representing the interests of the insurance company. Foster could face a similar problem with his own lawyer if she prefers a quick settlement to a trial so she can move on to other cases. Agents may enjoy expertise and access to information un- available to those they represent, allowing them to see the out- lines of a deal more clearly and to shape perceptions accordingly. But when agents’ own interests are not fully aligned with those of their principals, they may use their expertise and information to advance their own interests. MANAGING CONFLICT 165
UNDERSTANDING CONFLICT SYSTEMS Some disputes don’t get resolved. Once sparked, they evolve into bitter, ongoing conflicts among contending parties who have no choice but to continue to interact. This transformation occurs when some or all of the parties take actions that cause irreversible hostility. Such actions could involve loss of life, or a mortal insult to character or integrity, or a searing loss of face. Combined with the need for ongoing interaction, hostility transforms simple dis- putes into self-sustaining conflict systems. In such situations, il- lustrated by the following case, the goal is conflict management, not dispute resolution. Ron Emmons, president of Seneca Systems, a large manufac- turer of microcomputers, wasted no time when his marketing peo- ple reported a surge in warranty claims on the company’s newly launched Phoenix computer. After running successfully for three to four months, a significant percentage of Phoenix machines ex- perienced systems failures requiring replacement of the main printed circuit board. Emmons immediately called Desmond Lovell, vice president of Seneca’s Assembly Division. Lovell already had his quality en- gineers working around the clock, and he told Emmons that they had traced the problem to the PowerMiser microprocessor chip supplied by Seneca’s Data Devices Division. The engineers be- lieved the problem to be due to static charge–induced failures of the PowerMiser chips caused by weak insulation. Microprocessors are unusually sensitive to slight static electrical changes that break down internal insulation between circuits. Emmons then contacted the vice president of Data Devices, David King, who denied responsibility for the problem. Outside customers for the same chip had not complained, King told Em- mons, and his staff attributed the problem to damage done to the chips at Lovell’s assembly plant due to inadequate training and equipment. King intimated that Lovell was lying to avoid blame. Lovell and King had clashed before. Lovell was an engineer from a working-class midwestern family who had risen through the 166 BREAKTHROUGH BUSINESS NEGOTIATION ranks. King, the son of a Nobel Prize–winning scientist, had a Ph.D. in physics from Stanford. Both were superb at their jobs, but the two disliked each other at a visceral level. Their ongoing conflict had been stoked by the company’s measurement-and-incentive sys- tem, which strongly rewarded the two vice presidents for promot- ing growth and keeping costs down in their individual units. Lovell and King were also vying to succeed Emmons as CEO. The result was a history of strained interactions between the two over pricing, product schedules, and a host of other issues. Dis- putes erupted periodically. Over time, the conflict had spilled over to provoke bad feelings between employees of the two divisions, impeding communication and cooperation. But it hadn’t yet had a harmful impact on the company’s performance. Emmons called in Lovell and King and read them the riot act. "If you two can’t work out this problem, and fast, I’m going to find people who will," he said, adding, "I don’t care who’s at fault. I want the problem fixed, and I want it fixed now." As for whose budget would pay for the repairs, Emmons said, "If you can’t work that out between the two of you, I’ll split the baby." Lovell and King appointed a task force of senior people from their groups to fix the problem and recommend a formula for splitting the costs. The team ultimately attributed 40 percent of the problem to Data Devices and 60 percent to Assembly and proposed apportioning the cost accordingly. Data Devices would also provide technical advice to the Assembly Division. Without ever speaking to each other directly, the two vice presidents signed off on the proposal, and things quieted down. Self-Reinforcing Conflict Systems Self-sustaining conflicts like this one remain mired in a state of low-level hostility, impervious to efforts at resolution. It is use- ful, in fact, to think of longstanding conflicts as self-reinforcing systems stuck in a permanent state of cold war—low-level con- tention and friction that is neither all-out war nor durable peace. 11 Periodically, something will trigger a bout of escalation. Usually, MANAGING CONFLICT 167 however, escalation doesn’t result in all-out violence. At Seneca Systems, for example, the two vice presidents’ disagreement flares, then dies down. Meanwhile, however, attempts at peacemaking get under- mined. At Seneca, efforts by lower-level people to improve rela- tions between the two divisions foundered. Bitter disputes can thus persist in a cold war equilibrium, punctuated by occasional esca- latory episodes and failed peacemaking efforts. Persistent conflict of this kind results from a dynamic tension between forces militating for escalation and those resisting esca- lation. Think of a longstanding labor dispute between a union and a company. The union numbers both radicals and moderates. Moderates prefer to address ongoing disputes through the con- tractual grievance mechanism (a restraint on escalation), while the radicals periodically act more confrontationally (promoting escalation). When management provokes them, the radicals may respond with work slowdowns, sick-outs, and even sabotage. The radicals are seeking to wrest political power within the union, and they miss no opportunity to deride moderates’ efforts at concilia- tion as a sellout to management. Management too has its hard-liners and moderates. The hard- liners are virulently anti-union, a stance that has only hardened over time. Given the choice, they would respond to the union radicals’ actions with every provocative tool at their disposal, in- cluding legal actions and lockouts. The moderates within man- agement want to improve the company’s relationship with the union, but find their efforts undermined by hard-liners who deride them as weak. Over time, the company and the union have en- gaged in low-level contention, punctuated by war in the form of long and costly strikes. Both the company and the workers have suffered. The conflict system model in the figure on page 169 illustrates these dynamics. 12 Think of the curve in the center of the figure as a series of hills and valleys. The three valleys represent possible stable states: peace, cold war, and war. The hills represent forces that 168 BREAKTHROUGH BUSINESS NEGOTIATION resist change in one direction or the other. The ball at the bottom of the valley labeled "Cold War" represents the equilibrium state of a self-sustaining conflict: neither war nor peace. Driving and Restraining Forces Events and people that propel conflict out of the cold war valley toward either war or peace are driving forces. Escalatory actions (such as a work slowdown) push the conflict up the hill to the right, toward all-out war in the form of strikes and lawsuits. Con- ciliatory actions (such as efforts to negotiate new workplace arrangements) push the ball up the opposite hill toward peaceful coexistence. Longstanding conflicts like the one between Lovell and King develop built-in regulatory mechanisms that resist change in either MANAGING CONFLICT 169 The Conflict System Model Barriers to settlement Conciliatory actions Escalatory actions Restraints on escalation Peace Tipping Point Slippery Slope War Cold Wardirection. As driving forces push the system toward war or peace, they are met by restraining forces that act to maintain the cold war equilibrium. These forces are represented in the figure by the slopes surrounding the cold war valley; it would take an uphill push to reach a state of either peace or war. Escalatory forces are restrained by forces that moderate conflict. Likewise, peacemaking efforts are met by efforts to block resolution. As the forces that militate for war gather strength, so do the restraining forces—at least at first. As tension in the system rises, however, the conflict reaches a tipping point beyond which a slight additional push can cause rapid acceleration toward a new state. 13 These tipping points are represented by the tops of the hills in the figure. As long as escalatory forces fail to reach some threshold, re- straining forces will tend to pull the conflict back to its cold war equilibrium. At the threshold, however, a small increment can ac- celerate a slide down the slippery slope to full-scale conflict. The dynamics of a particular conflict depend on the relative balance of driving and restraining forces. If the restraints on esca- lation are weak, the slope on the right will be low and violence will be easily ignited. For example, if outside parties like Ron Em- mons can’t intervene effectively, we can expect conflict to flare more frequently and escalate more seriously. Irreversible Psychological Transformations Self-sustaining conflicts provoke irreversible psychological changes in the contending parties that discourage peacemaking efforts. Managing such conflicts requires an understanding of these psy- chological changes, particularly partisan perceptions, reactive de- valuation, and groupthink. Partisan Perceptions. When conflicts become embittered, the parties begin to gather and interpret information about each other in profoundly biased ways. 14 Their perceptions get distorted in three ways. First, partisans assume that they themselves see things 170 BREAKTHROUGH BUSINESS NEGOTIATION objectively, whereas their opponents have extreme and distorted views. 15 Second, partisans tend to misjudge the other side’s moti- vations, underestimating the situational pressures their coun- terparts face. Third, as illustrated in the accompanying figure, partisans consistently overestimate the distance between them- selves and the other side. At the same time, individual partisans tend to see themselves as more moderate than typical members of their own group. Robert Robinson calls this the "lone moderate" phenomenon. 16 The net result is marked exaggeration of the ac- tual differences between the sides. As a consequence, the parties indulge in selective perception— Lovell and King, for instance, interpret each other’s actions in ways that confirm their preexisting negative beliefs and attitudes. They even unconsciously overlook evidence that challenges their stereotypes. They may also adopt a zero-sum mentality that casts the negotiation in purely distributive terms. Finally, their behav- ior may contribute to self-fulfilling prophecies. MANAGING CONFLICT 171 Partisan Perceptions More Extreme More Extreme Ideological Divide Actual Differences Our View of Them Moderate’s View of Own Group Perceived Differences Us Us Us Me Them Them Them Them
Reactive Devaluation. As we saw in Chapter Three, gestures in- tended to be conciliatory are often discounted or ignored by the other side, a phenomenon known as reactive devaluation. 17 If Lovell believes King to be untrustworthy and totally self-interested, any conciliatory gesture will be treated with profound suspicion, as ei- ther a trick or a sign of weakness. Any other conclusion would re- quire a fundamental reassessment of the other side. If the overture is interpreted as a deception, the typical response is counterde- ception or rejection. If it is seen as a sign of weakness, the response may be to press forward aggressively. Groupthink. Conflicts between groups, such as the divisions at Seneca Systems, stimulate shared psychological transformations within the opposing sides—a phenomenon that Irving Janus has termed groupthink. 18 Internal cohesion increases within groups in conflict. A two-sided worldview develops: we represent truth and justice, desire only security and self-respect, and respond reason- ably to provocations, while they are bent on our destruction and are essentially evil. These attitudes infect communication between the groups. Contact is discouraged, and any communication is treated as a concession. The perceived need for solidarity results in suppres- sion of internal dissent, in part through pressure to conform but more perniciously through self-censorship. Moderate leaders get pushed aside by radicals. Individual inclinations toward over- confidence get magnified, and an illusion of invulnerability can take hold. HANDLING CONFLICT When you seek to resolve a dispute or manage a conflict, you have an array of tools at your disposal. You can pull in third-party intervenors to change the pattern of communication and the par- ties’ perceptions of their BATNAs. You can design momentum- building processes to help override barriers to agreement. And you 172 BREAKTHROUGH BUSINESS NEGOTIATION can work to change the game by altering the balance of forces act- ing on the contending parties. Third-Party Intervention Third-party intervenors (we use the terms third-party and inter- venor interchangeably) can play constructive roles in disputes and sustained conflicts. Note that we said intervenors, not mediators. Traditional mediators, like Dwight Golann in the Foster-Wood dispute, are just one type of intervenor. The others are arbitrators, whose coercive power equips them to impose settlement terms on the contending parties, and negotiators, who pursue their own interests by bargaining with the contending parties to end the dispute. Ron Emmons of Seneca Systems is an example of an ar- bitrator. Although he didn’t exercise it, he had the power to im- pose an agreement on Lovell and King. Intervenors’ Interests To understand the roles that intervenors can play, it is useful to explore why third parties intervene in conflicts and to identify the sources of their power. Why do outside parties decide to in- tervene in conflicts? Like Golann, they may be invited in. But even seemingly impartial mediators may be pursuing personal or insti- tutional goals, such as enhanced reputation. And many otherwise neutral mediators (who have no preexisting bias toward one or another of the disputants) nonetheless have a substantial bias to- ward settlement. Other outside parties insert themselves into a conflict because it threatens their vital interests. Seneca’s CEO Ron Emmons might have intervened in the conflict between Lovell and King for this reason. If a conflict spills over, affected outside parties have a pow- erful incentive to minimize the damage. And outsiders partial to one of the disputants try to influence the conflict in favor of their allies. Emmons had not revealed whom he favors as his successor, MANAGING CONFLICT 173but his preference could easily have influenced how he approached the conflict between Lovell and King. Intervenors’ Sources of Power. Third parties can wield three types of power, and their roles in conflicts are strongly shaped by their sources of power: • Facilitative power. Intervenors’ facilitative power derives from their status, legitimacy, process management skills, and per- suasiveness. These are the prime sources of influence that tradi- tional mediators like Dwight Golann draw on. The techniques that mediators can use to implement their facilitative power are sum- marized in the accompanying table. There are limits to how much third parties can accomplish with facilitative power alone. A mediator alone cannot coerce the parties or offer tangible incentives. Thus, the contending parties must be willing to make peace but may be unable to overcome residual barriers on their own. To gain entry to a dispute, a mediator needs permission from the contending parties. Initially, both parties try to dominate the choice of intervenor. When one party is far more powerful than the other, however, the only possible way to move forward may be for the weaker party to accept a "biased" intervenor. Upon gain- ing entry, the mediator automatically becomes a target of influ- ence attempts: both parties try to sway the mediator (or to discredit a mediator they consider biased). • Coercive power. A third party with coercive power can uni- laterally impose terms of settlement. The intervenor may be in a position to punish the contending parties or to block their access to crucial resources. As CEO of Seneca, for example, Ron could have coerced Lovell and King to come to an agreement. When a third party wields coercive power, control over deci- sions shifts away from the disputants. Intervenors with facilita- tive power enjoy only as much influence as the parties are willing to concede, but coercive power is innate and independent of the 174 BREAKTHROUGH BUSINESS NEGOTIATION MANAGING CONFLICT 175 Mediation Techniques Technique Description Enhancing An intervenor opens up a communication and shaping channel by shuttling between the contending communications parties, as Golann did in the Foster-Wood case, or by convening face-to-face meetings in neutral locations. A third party can also relay messages, soften language, raise the salience of potential common ground, and otherwise shape communications. Setting up action- Third parties may impose deadlines that call for forcing events hard choices. The parties then have to decide whether to let the intervention "fail" or make the necessary compromises. Golann could, for example, have imposed a time limit on his own involvement. Critiquing the A third party can provide a reality check by parties’ positions assessing both sides’ positions. By throwing cold water on unrealistic and incompatible aspirations, the intervenor may move the parties toward a settlement. Golann did this when he assessed the likelihood of each side prevailing in court and the size of the damage award. Proposing creative An intervenor can suggest trades that create options value for both parties. Because of reluctance to reveal their interests, communication barriers, and differences in frames, the parties may have overlooked shared interests or been unable to move in mutually beneficial directions. An intervenor may also enable the parties to back away from mutually incompatible commitments without loss of face. Persuading the The parties may make concessions to an parties to make intervenor that they could not make to each concessions other. Dwight Golann could have asked Foster parties. In disputes with significant spillover potential, outside par- ties may feel justified in imposing outcomes, and even punish- ing the disputants, to deter future eruptions. Direct coercion has potential costs to the intervenor, however. For one thing, coer- cion is often costly. 19 And a settlement that is imposed on the disputants is inherently unstable. One or both will view the settlement as illegitimate and may feel free to violate its terms. Coercion thus necessitates postsettlement monitoring and en- forcement: the intervenor has to be willing to act as its guarantor and enforcer. For these reasons, a third party with coercive power often chooses to exercise power in more indirect ways. One option is 176 BREAKTHROUGH BUSINESS NEGOTIATION Mediation Techniques (continued) Technique Description and Wood, "If the other side made this con- cession, would you make a countervailing concession?" and promised not to reveal either side’s response unless both agree. Absorbing anger An intervenor may allow the parties to blow off and taking blame steam and otherwise serve as an emotional buffer. In the Seneca situation, both Lovell and King can aim some of their anger at Emmons instead of each other. Serving as a A third party can act as guarantor of an guarantor of agreement in order to make it more agreements sustainable. This role is especially important when one or more of the parties may back away from full implementation or "reinterpret" the agreement strategically. Source: For further discussion of intervenor’s power, see C. W. Moore, The Mediation Process (San Francisco: Jossey-Bass, 1996). See also J. Bercovitch and J. Z. Rubin, Mediation in International Relations: Multiple Approaches to Conflict Resolution (New York: Macmillan, 1992); and M. Watkins and K. Winters, "In- tervenors with Interests and Power," Negotiation Journal 13, 2 (1997). to threaten intervention as a way of spurring the parties to ne- gotiate. This is what Ron Emmons did in the conflict between Lovell and King. • Bargaining power. A third party with bargaining power is in a position to reward the disputants for making peace. The inter- venor with bargaining power effectively becomes a party to the ne- gotiation and manipulates the combatants’ perceptions of their alternatives by enlarging the pie. Suppose it had been not Ron Em- mons but rather Kelsey Madden, Seneca’s vice president of mar- keting, who mediated between Lovell and King. If she had had funds of her own to contribute to solving the problem, she would have been an intervenor with bargaining power. She could have used those funds to speed up a settlement but would have had to bargain with Lovell and King over who would pay what. Bargaining power is a mixed blessing. As soon as an intervenor becomes a party to a negotiation, attitudes toward her shift. If the disputants suspect that the intervenor is willing to offer compen- sation, they will be less open about their interests and bottom lines. The intervenor in turn will be less able to generate creative options and more likely to be drawn into bargaining. 20 Further- more, disputants who agree on little else often cooperate in ex- tracting a high price for peace when they know the third party has interests at stake and resources to bargain with. Thus, Kelsey Mad- den may be vulnerable to implicit cooperation between King and Lovell to extract value from her. Both would be happy to see her use her resources to help pay for their problem. Intervention Roles. Now that we understand intervenors’ sources of power, we can think about the intervention roles that third parties play in disputes. As a starting point, let us look at three "pure" roles: • Mediator. A pure mediator, such as Dwight Golann, is an impartial and mutually acceptable third party whose goal is to help resolve the dispute. The mediator has no bias toward either party and no self-interest in achieving or preventing a settlement. MANAGING CONFLICT 177 Although mediators lack power to coerce or bargain, they can use facilitative power to influence disputants. To gain entry to the dis- pute, a mediator must be accepted by the contending parties. • Arbitrator. A pure arbitrator, such as Ron Emmons, is an im- partial third party with the coercive power to impose terms of set- tlement. Arbitrators are not biased toward either party, and they subordinate their own preferences to some set of rules or values. Nor does a pure arbitrator have a personal stake in the outcome sufficient to engage in bargaining with the disputants. • Negotiator. A pure negotiator, such as Kelsey Madden, has well-recognized interests in the outcome, either in getting a set- tlement (substantive interests) or in seeing one of the disputants prevail (relationship-coalitional interests). Negotiators lack co- ercive power, but may use bargaining power to gain entry and ad- vance their own interests. In practice, intervenors often play a mixture of these three pure roles. Mixed third-party roles can be characterized by referring to the two-dimensional intervention role grid in the figure on page 179. On the vertical axis, mediator and negotiator are poles on a continuum of extent of stake in the outcome. At the bottom is the impartial mediator (Dwight Golann) who seeks a mutually ac- ceptable resolution to the conflict; at the top is the partisan ne- gotiator (Kelsey Madden) pursuing self-interests or those of an ally. Neither mediator nor negotiator has coercive power, and both have facilitative power to influence the disputants. But the medi- ator is disinterested, whereas the negotiator is highly interested and possessed of bargaining power. Between the poles are various stances that combine a desire to help resolve their dispute with an interest in achieving desired outcomes. At the center is the me- diator-with-an-interest. On the horizontal axis, mediator (Golann) and arbitrator (Ron Emmons) are poles on a continuum of extent of ability to impose outcomes. Both seek to resolve the conflict, and neither has a strong personal stake in the outcome or incentives to bargain. How- 178 BREAKTHROUGH BUSINESS NEGOTIATION ever, an arbitrator can coerce a settlement, while the mediator must be acceptable to the disputants and must rely on facilitative power to influence them. Between the mediator and the arbitrator are roles with varying degrees of coercive power. At the center is the mediator-with-muscle, who exercises some ability to coerce the dis- putants but cannot simply impose an outcome on them. Goal and Method Dilemmas. If you intervene in a dispute, you will inescapably confront tensions over the goals you pursue and the methods you use. These tensions will vary with the role you adopt. MANAGING CONFLICT 179 Intervention Role Grid Stake in Outcome Low Low Ability to Impose Outcome High High Negotiator Mediator Arbitrator Mediator-with- an-interest Mediator-with- muscle Emmons Golann Madden • Dilemmas for mediators. Conventional mediators such as Dwight Golann face a difficult choice between narrow and broad goals. They may stay focused on the presenting problem—the po- sitions and issues that are the focal point of conflict. Or they may try to address the systemic root causes—the underlying interests, history of grievances, and structure of interactions—in hope of a long-term resolution. 21 Premature efforts to tackle root-cause is- sues can open old wounds, weaken constituent support, and cause the entire process to stall or break down. By contrast, working in- crementally builds confidence and can set the stage for later broad agreements, but the resulting agreement may be unsustainable if the real causes of the conflict are overlooked. Mediation methods pose another dilemma. A mediator must choose between merely facilitating the disputants’ efforts to com- municate and working more actively, as Golann did, to evaluate positions and identify options for mutual gain. 22 Mediators who limit themselves to facilitation alone forgo opportunities to help the disputants abandon entrenched positions. The more activist approach, however, can be risky if the parties fail to claim full own- ership of the agreement or get too far ahead of their constituen- cies and lose credibility. This can cause the negotiations to collapse in acrimony. • Dilemmas for intervenors with interests. Intervenors with an interest in the outcome, like Kelsey Madden, experience an addi- tional goal dilemma: how aggressively to pursue their own inter- ests versus the best interests of the contending parties. Because Sheila is directly involved in creating and claiming value in a multiparty negotiation with Lovell and King, she is also likely to confront a methods dilemma: a version of the classic negotiator’s dilemma discussed in Chapter Three. 23 If she tries to claim value, she will have trouble creating joint value. Conversely, if she works to create joint value, she risks having value claimed from her. • Dilemmas for intervenors with coercive power. Intervenors with coercive power, like Ron Emmons, are prone to a different goal- related dilemma: putting a stop to the immediate flare-up (what- 180 BREAKTHROUGH BUSINESS NEGOTIATION ever its form) tends to short-circuit a longer-term resolution. Em- ploying coercion to stop escalation may work against a sustainable resolution because it lowers the costs to the parties of continuing contention, and hence sows the seeds for future eruptions. This tension arises because coercion can control disputants’ behavior but can’t change their attitudes. There is usually a limit to an in- tervenor’s staying power to police terms of settlement, and there is a limit to the intervenor’s ability to observe the actions of the disputants. Intervenors with coercive power also experience a clas- sic methods dilemma concerning ends and means. Emmons may suppress conflict using means that damage his credibility or repu- tation or set unfortunate precedents. The figure on page 182 illustrates these goal-and-methods di- lemmas in terms of the intervention role grid. In the middle of the grid, mediators-with-an-interest and -muscle must manage all of these goal-and-methods-related tensions. Momentum-Building Processes When your goal is to build momentum by bootstrapping a conflict- wracked negotiation, the design of the process merits a fresh and hardheaded look. Circumstances determine whether it makes sense to conduct a shuttle or a summit, a multistage agreement, or se- cret back-channel diplomacy. Shuttles and Summits. Shuttles and summits bring utterly dif- ferent dynamics to bear on building momentum in negotiations, but are sometimes used at different stages of the same conflict. Think about a negotiation involving many parties, and ask your- self why you might decide not to bring them all together to nego- tiate as a group. If the parties can’t meet because of geographical or political constraints, for example, a shuttle can serve as a bridge for purposes of communication. When the parties still lack a shared definition of the problem or haven’t truly absorbed the con- sequences of no agreement, a shuttle can be a way to nudge them MANAGING CONFLICT 181 toward a common definition of the problem and the options be- fore bringing them to the table. Skillful framing and information control are needed as well. When it isn’t clear whether there is a bargaining range at all and differences appear insurmountable, a face-to-face meeting of the parties could break down entirely. A shuttle in this situation is an opportunity to learn: to gather information about interests and positions, figure out where the sticking points are, and per- haps begin to identify a promising formula for a deal. A fourth reason to opt for a shuttle is the risk that bringing the parties together too early will simply encourage escalation. A clas- sic example is the negotiation in the early 1990s between the gov- 182 BREAKTHROUGH BUSINESS NEGOTIATION Stake in Outcome Low Low Ability to Impose Outcome High High Negotiator Mediator Arbitrator Mediator-with- an-interest Mediator-with- muscle Own vs. disputants’ Interests Creating value vs. claiming value Narrow vs. broad Facilitate vs. evaluate Short term vs. long term Ends vs. means Plus Plus Goal-and-Methods Dilemmas ernment of Ecuador and the oil giant Conoco over oil field devel- opment in a tract of ecologically sensitive rain forest. Conoco was promoting itself as a green oil company, committed to ecological- ly sound oil drilling and waste disposal methods. Confident that environmental groups and indigenous inhabitants of the rain for- est would prefer Conoco to a less enlightened company, the firm called a summit of all the major parties at an isolated location on the Rio Napo in Ecuador. The meeting was a disaster. The envi- ronmental groups and indigenous groups were implacably opposed to any development and didn’t understand that drilling was vir- tually inevitable. The process got poisoned, and Conoco withdrew. Ultimately, the drilling concession went to a smaller company with fewer resources to mitigate environmental damage: a lose- lose outcome. In retrospect, a carefully sequenced shuttle might have paved the way for a winning coalition. The party who is shuttling back and forth should approach supporters of agreement early, explaining how other supporters see the issues and keeping opponents in the dark. Whatever its ra- tionale, a shuttle offers unmatched control over the process in the form of opportunities to frame the issues, control the flow of information, and manage the sequence of interactions. This is es- pecially true if other parties do not communicate directly with each other. If shuttles are this potent, why might you want to bring all the parties to the table at all? The most important reason is that in multiparty negotiations, agreements are rarely reached through a shuttle. Understandably, the parties will refuse to make their final concessions until everyone is present and a deal can be ham- mered out. Otherwise, they run the risk that another party will hold out to claim a final slice of value. Ultimately, the negotiat- ing must be simultaneous rather than sequential. A summit is also an occasion for learning of a very different type than occurs during a shuttle. Specifically, summits afford op- portunities to learn about the relationships among the parties, as apparent in patterns of deference and dislike. MANAGING CONFLICT 183 Concessions made at private meetings are more easily with- drawn than concessions made in public, so a summit helps to seal the deal and to prevent backsliding. This is one reason that the timing of summits is important: the process must have ripened enough for agreement to be a likely outcome. Finally, a summit is a way of focusing peoples’ attention and acts as an action-forcing event. By getting parties together, it is often possible to force uncommitted people to take a position, a kind of action-forcing event in itself. The objective of Conoco’s Rio Napo meeting was to situate the parties in an isolated hot- house environment to aim a lot of energy at reaching agreement. If the parties view failure of the summit as an undesirable outcome, they experience pressure to make the necessary difficult choices. As the Rio Napo meeting illustrates, the process has to have rip- ened or the result may be breakdown. A summit meeting is less controllable than a shuttle situation, but the organizer can wield influence by deciding who gets invited, controlling process details, and setting the initial agenda. Clearly, shuttles and summits play complementary roles, and it shouldn’t be surprising that they are often used in tandem. A shuttle is time-consuming, but when employed to learn, hammer out a shared definition of the problem, and establish a zone of agreement, it can set the stage for overcoming sticking points and locking in gains at a summit meeting. The same pattern of progress from one-on-one to group ne- gotiation is employed in many negotiating situations. A business leader pressing for organizational change often employs a shuttle- like process to educate and elicit initial buy-in from influential in- dividuals. The next step is usually group meetings to obtain public commitments to specific courses of action. Then the leader holds further one-on-one meetings to press for implementation. Multiphase Agreements. Multiphase agreements share an es- sential logic: the parties negotiate relatively easy sets of issues first, implement that agreement, and then move on to progressively 184 BREAKTHROUGH BUSINESS NEGOTIATION tougher issues. In one common form of phased agreement, the par- ties first negotiate the guiding principles for a mutually acceptable settlement. These principles then serve as a basis for negotiating more specific agreements and more divisive issues. Once guiding principles are in place, attention typically shifts to a general framework agreement and then to details of imple- mentation. The overarching rationale is that the experience of reaching agreement alters the parties’ attitudes toward each other and creates personal investment in the process. These changes in attitude and perception then kick in to overcome remaining barri- ers to agreement when the time arrives to tackle the hardest issues. A phased approach can have drawbacks, though. Settling the easy issues first leaves only the hard issues to be worked out at the end, and the parties will find that they remain hard. More crucial, the process may turn out not to build trust. Implementing the early agreements can inflame internal opposition and sour the relation- ship. The contending parties may build momentum only to run straight into a brick wall. Efforts to build momentum through phased processes must therefore be undertaken with care, ensur- ing that enough issues remain on the table for the parties to craft some mutually acceptable trades in later phases. Secret Diplomacy. Leaders sometimes choose to craft an agree- ment using secret or back-channel diplomacy and then present it to their constituencies for ratification as a fait accompli. Secrecy effectively transforms a two-level (internal-external) negotiation into a simpler bilateral process, delaying the internal negotiations and marginalizing opposition. As international negotiation expert Fred IklĂ© explains: Secrecy has two major effects in diplomacy. First, it keeps [internal] groups ignorant of the process of negotiation, thereby preventing them from exerting pressures during suc- cessive phases of bargaining. Second, it leaves third parties in the dark and thus reduces their influence. The exclusion MANAGING CONFLICT 185 of the public may help overcome domestic opposition to concessions or threats before negotiations are completed. 24 Secrecy also insulates the parties from media attention so they can forgo posturing and concentrate on the substantive issues. Like phased agreements, secret diplomacy has potential draw- backs. Its very secrecy will tend to legitimate protest by those who are excluded from the process. Marginalizing such groups may have been necessary in order to move forward, but their opposition makes it particularly urgent to sell secret agreements once the ink is dry. The goal is to create and sustain a supportive coalition of the middle. Changing the Game By definition, simple disputes get resolved. In conflict systems, definitive resolutions are far harder to achieve. But some union- management relationships have been fundamentally changed for the better, and even nations with long histories of war have em- braced peaceful coexistence. There is reason for optimism. Suppressing Escalation. It’s difficult to settle a bitter dispute if escalatory episodes continue to erupt. Each bout of escalation sets back efforts to negotiate a resolution. Three approaches to dis- charging escalation—all involving shaping the parties’ perceptions of their BATNAs—are effective: Avoidance. Help the parties to avoid each other. Avoidance is a substitute, and sometimes an effective one, for resolution of a dispute. But while Foster and Wood can decide never to interact again, it is not always possible to separate the combatants. Lovell and King are inextricably intertwined with each other unless one leaves the company. Mutual deterrence. Help the parties build a regime of mutual deterrence. The capacity to visit pain on each other will 186 BREAKTHROUGH BUSINESS NEGOTIATION act as a brake on escalation. This is the logic of mutually assured destruction. In the case of Foster and Wood, the costs and uncertainties associated with lawsuits acted as a restraint on escalation. Coercive intervention. Pull in outside parties to shape the disputants’ perceptions. By putting Lovell and King on notice that their actions were damaging the corporation, Emmons implicitly threatened both with loss of their shot at leading Seneca. Altering the Balance of Forces. Suppressing escalation is a good first step, but it doesn’t change the basic dynamics of a conflict system. The dispute simmers, always ready to boil over again. Con- flict suppression can go on and on without changing the under- lying reality. True resolution of a sustained dispute requires changing the game—eliminating underlying causes and transforming the dri- ving and restraining forces in the conflict system. A general guide- line to doing this is to weaken incentives for competition and strengthen incentives for cooperation. At Seneca, for example, the conflict between Lovell and King was fueled by the company’s in- centive system, which rewarded individual rather than collective performance. By altering rewards to emphasize overall company re- sults, CEO Emmons could change the balance of forces in the con- flict system. Over time, Lovell and King (and their subordinates) may cooperate more because it is in their interests to do so. TRANSFORMING CONFLICT SYSTEMS Fundamental transformation of a conflict system always involves dealing with deeply internalized feelings of grievance. Often all sides cast themselves as victims and use this stance to rationalize their actions. They may even vigorously compete to convince out- side parties of their victimization. Transformation of a conflict calls for cutting the Gordian knot that binds the parties in a mutually MANAGING CONFLICT 187 reinforcing, destructive relationship and providing opportunities to move from contention to rebuilding. In between, the parties may need to come to terms with their losses, give up on efforts to seek revenge, and become psychologically ready to move forward. This process takes time and a lot of patience. The tools presented in this chapter are applicable to personal conflicts as well as business negotiations. You probably experi- ence conflict, or observe its effects, almost daily with family, friends, neighbors, or coworkers. The approaches to dispute resolution and conflict management described here are no panacea, but employ- ing them skillfully can make a difference. 188 BREAKTHROUGH BUSINESS NEGOTIATION

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