Monday, January 1, 2007

Shaping the Structure

Claire Prescott, the young founder and CEO of a year-old commercial real estate company, was close to abandoning her ne- gotiations with BargainMart’s newly hired regional director for development, Eric Mersch. Claire had been negotiating to sign BargainMart, a respected nationwide discount retailer, as the an- chor tenant in a shopping mall she was developing in Fairfield, a midsized city north of Boston. Three days earlier, her discussions with Mersch had broken down acrimoniously. Claire was nearly ready to call it quits when he requested another meeting. His call raised her hopes of getting the negotiations back on track, but she was uncertain how to move in a more productive direction. Claire was under a great deal of pressure to get a deal done. Eleven months earlier, after leaving an established development company to start her own firm, she had negotiated a one-year op- tion on an attractive parcel of land in Fairfield. The resulting mall project was her new company’s first major deal, and she was count- ing on it to put her on the map. Failure to reach an agreement with BargainMart or another retailer of equivalent stature would be a severe setback. Claire’s development plan for the mall called for one large an- chor store and many smaller satellite stores. She had planned to close a fifteen-year deal (with options to extend) with a good an- chor tenant and then to negotiate seven-year leases with satellite 45 46 BREAKTHROUGH BUSINESS NEGOTIATION tenants. Once these leases were signed, she would conclude a fi- nancing deal with a local commercial bank and exercise her option on the land. The bank had provisionally agreed to a ten-year re- payment schedule if the credit officer was satisfied that Claire had put together a viable mall. Progress was smooth until Claire hit a snag over zoning. Al- though ultimately resolved satisfactorily, the permitting process ate up nine months of precious time. Claire then quickly initiated discussions with the best anchor-tenant candidate, BargainMart. She had considered approaching BargainMart’s arch-rival, Value- Shops, too, but her early conversations with Eric had been very encouraging. He had seemed to want to close a deal promptly, so Claire had focused on coming to terms with him. Initial discussions over the size and configuration of the space went smoothly, but then the tone changed. Eric expressed mis- givings about Fairfield’s economy—vibrant but highly dependent on the defense industry—and pressed for very low rent and broad flexibility to transfer the lease to another firm if BargainMart didn’t prosper. He also insisted on carte blanche about use of the space. It was BargainMart’s policy, he said, not to enter into agree- ments that restricted its use of space or its freedom to sublet por- tions of the space to others. Eric invoked BargainMart’s standard clause about use, transfer of the lease, and subletting, and asserted that he could not deviate from it: "The premises may be used for any lawful purpose. Tenant may transfer this lease or sublet the whole or any part of the premises, but if it does so, it shall remain liable and responsible under this lease." This clause was a deal breaker for Claire. Her bank would not finance the project under such conditions, and satellite tenants would not be likely to find the mall attractive without some con- straints on BargainMart’s ability to enter new lines of business, sub- let to potential competitors, or close up shop without warning. Claire’s suspicion that Eric was playing hardball with her led to an angry exchange. With only weeks left before expiration of her op- tion on the land, she felt up against the wall. For BargainMart, this project was only one of many potential opportunities, but for her company it was make-or-break. Claire was facing up to the prospect that the entire project would collapse when she received Eric’s call. Take a few minutes to decide what advice you would give Claire about what to do now. And if she had it to do over, what should she have done differently? THE DIAGNOSIS Before meeting with Eric for the first time, Claire should have care- fully diagnosed her situation using the tools developed in Chap- ter One: a party map, an assessment of barriers and opportunities, and a trade-off matrix. Let’s review the diagnosis she could have made and then look at where she stands now and how she can re- pair her disadvantages. Mapping the Linked System Claire should have begun by identifying all the parties, actual and potential, and mapping the linked system of negotiations as shown in the figure below. SHAPING THE STRUCTURE 47 Claire BargainMart Bank Land Owner ValueShops Satellites Local Government Eric Eric’s Boss48 BREAKTHROUGH BUSINESS NEGOTIATION What might Claire have learned from this map? First of all, her negotiation with Eric is only one strand in a web of linked nego- tiations. Second, existing and potential linkages create some for- midable barriers and opportunities. Her negotiations with Eric are sequentially linked to her previous negotiations with the land- owner over the option, which is the time bomb she hears ticking. Her negotiations with the bank, on the other hand, are recipro- cally linked to her negotiations with Eric; she can’t do a deal with the bank without doing a deal with Eric, and vice versa. The time and funding constraints that flow from these two linkages are com- plicating her discussions with Eric. But Claire also has opportuni- ties to create competitive linkages that could strengthen her bargaining position, such as by initiating discussions with Bar- gainMart’s competitor ValueShops. Diagnosing Barriers and Opportunities A thorough analysis of the structure of the negotiation as it stands now, using the seven-element structural framework presented in Chapter One—parties, rules, issues, interests, alternatives, agree- ments, and linkages—will help Claire identify barriers and oppor- tunities in her negotiations with Eric. Barrier Opportunity Parties The negotiation was Make an overture to defined as a two-party ValueShops. interaction, though there are other influential parties. Eric may try to use Negotiate to build a ratification tactics. coalition of attractive satellite shops. SHAPING THE STRUCTURE 49 Barrier Opportunity Rules Zoning problems delayed Find out if local government the project. would offer tax breaks to improve the economics of the project. The bank’s credit See if the bank is willing to standards impose be more flexible or explore constraints. whether BargainMart can help with financing. Issues Multiple issues are Unbundle the issues of use, bundled into lease transfer, and BargainMart’s standard subletting, and analyze uses clause. their relative importance. Acrimonious interactions Work to defuse bad feelings. with Eric may have poisoned the relationship. Interests Both Claire and Eric are Look for shared goals and locked into positions. mutually beneficial trades. Alternatives Claire has no alternative Make an overture to to dealing with ValueShops. BargainMart, but Eric is under no pressure to close a deal. Agreements The negotiations have Try to reframe the been framed as purely negotiations to emphasize value claiming in nature. potential joint gains. Eric may feel pressure to Look for ways to help Eric produce a big win in his back away from his position first deal for BargainMart. gracefully. Linkages The deadline on the land Negotiate to extend the option is forcing action. option, if possible. The bank is imposing Talk to other potential restrictive conditions. sources of financing. BargainMart is the only Set up competitively linked option. negotiations with ValueShops. By doing this analysis, what does Claire learn? First, she dis- covers that her BATNA is weak and Eric’s is probably strong. Her BATNA is to abandon this project and invest her time and re- sources elsewhere. She hasn’t developed alternatives and is there- fore in a vulnerable position; she urgently needs to strengthen her BATNA. As for Eric, Claire doesn’t know for certain whether he has alternatives locally or elsewhere, but it is reasonable to assume that he is exploring options, including the option to focus on a different market altogether. She may be able to pick up clues by querying others in the industry and by studying publicly available information about BargainMart’s strategy and plans. Second, the negotiation has clearly become focused on claim- ing value, although there appear to be significant opportunities to create value. Claire should try to reframe the proceedings to em- phasize opportunities for joint gain. Because the focus on Bar- gainMart’s standard clause about use, transfer, and subletting is obscuring the fact that these are separable issues, she should try to unbundle them in order to identify opportunities to enlarge the pie. Third, Claire needs to figure out whether BargainMart’s stan- dard clause is a hard constraint or—as is more likely—a bargaining position. If Claire can persuade developers who have previously dealt with BargainMart to describe the provisions of their deals on use, lease transfer, and subletting, she can probably figure out how much substance there is in Eric’s invocations of company policy. In hindsight, Claire could have negotiated more effectively to influence how local government applied its regulations to her project. The problems with zoning were probably foreseeable and avoidable, and early discussions might have led to tax breaks and agreements on infrastructure that would have helped make the project more attractive. Creating Value Claire should analyze her own and Eric’s interests and trade-offs. Suppose this analysis resulted in the accompanying trade-off ma- trix. (Obviously, this initial assessment of Eric’s interests must still 50 BREAKTHROUGH BUSINESS NEGOTIATION be validated through learning at the table.) What does it suggest about potential opportunities to make mutually beneficial trades? The issues of use and transfer of the lease appear to present a promising opportunity: if Claire’s analysis is correct, Eric might be willing to accept some constraints on use in return for more at- tractive terms on transfer. There could also be room for a trade on the issues of lease price and subletting. As the final step in her diagnosis, Claire could brainstorm ways to advance shared goals, make beneficial trades, and create mech- anisms to secure agreements. The resulting analysis is summarized in the table on pages 52–53. Be sure to note how the standard value-creating tools described in Chapter One, such as trades across time and risk-shifting agreements, potentially help Claire to expand the pie. FROM DIAGNOSIS TO SHAPING THE STRUCTURE Now Claire is ready to address the second major element of the breakthrough framework: shaping the structure of the negotiation. This calls for a shift of focus from diagnosis to thinking like an ar- chitect about how to fashion the components of a negotiation into favorable configurations. It’s possible to shape the structure of negotiations because they are, to a degree, socially constructed. This means that (1) the par- ties and the issue agenda are not fixed in advance but influenced SHAPING THE STRUCTURE 51 Approaches to Creating Value Parties Issues Claire Eric Lease price ↑↑↑ ↓↓ Use ↓↓↓↓ ↑↑ Transfer of the lease ↓↓ ↑↑↑↑ Subletting ↓ ↑↑ 52 BREAKTHROUGH BUSINESS NEGOTIATION Source of Joint Gains General Approach Specific Example Advancing Economies of BargainMart and the satellite stores shared goals scale pursue joint marketing stategies facilitated by Claire’s firm. Economies of BargainMart is permitted to sublet scope to providers of complementary services (such as a children’s play area) in exchange for revenue sharing of the incremental rents with Claire’s firm. Making Cross-issue trades BargainMart gets more flexibility beneficial on lease transfer and subletting in trades exchange for somewhat higher rent and more stringent use provisions. Trades across BargainMart gets more flexibility on time use and lease transfer in the future (such as after five years) and Claire gets more stability up front so she can secure funding. Risk-shifting BargainMart’s rental payments are agreements linked to its in-store sale revenues. Contingent Transfer of the lease is tied to an agreements index of local economic activity: the healthier the local economy, the less flexibility for BargainMart. Securing Standards and BargainMart can transfer the lease, insecure principles but only to an agreed-on list of agreements reputable companies. Changes in use may not directly compete with major satellite stores. Subletting is permitted up to a specific percentage of the space. by the negotiators, and (2) perceptions of interests, BATNAs, and bargaining ranges are inescapably subjective, often unclear to the negotiators themselves at the outset, and subject to change as the process unfolds. Although markets, organizations, laws, and customs establish boundaries for the bargaining range and shape the rules of the game, you almost always have scope to in- fluence the basic structure of your situation and the perceptions of your counterparts. And perceptions are often more important than realities. What is your bottom line? It’s what you think it is, or what your counterpart believes it to be. It’s essential to begin this design work before going to the table. As Abraham Lincoln astutely remarked, "If I had eight hours to chop down a tree, I’d spend six sharpening my ax." SELF - ASSESSMENT : SHAPING THE STRUCTURE • Have you tended in the past to take negotiating situations more or less as they are presented to you? • Have you focused too much on what happens at the negotiating table, and not enough on actions you can take away from the table? SHAPING THE STRUCTURE 53 Dispute- Provisions for how disagreements resolution will be handled, possibly including provisions mediation and arbitration clauses, are included in the contract. Monitoring Regular independent inspections are regimes made of the space and its condition. Incremental The lease is structured for a ten-year implementation initial term with an option to renew. Guarantees Performance bonds are posted for timely completion of the project. • Can you recall a negotiation that other parties shaped in ways that were disadvantageous to you? How were they able to do so? • What might you have done differently? So far, Claire has played Eric’s game. She hasn’t tried to influ- ence who participates or to set the agenda. She is also at the mercy of a deadline she negotiated, and she hasn’t cultivated attractive alternatives. Fortunately, she has recognized this dilemma in time, and she is eager to repair it using all of the structure-shaping tools at her disposal: • Changing the players: Influencing who participates by adding and eliminating parties • BATNA building: Improving your own alternatives or weak- ening your counterparts’ (or both) • Setting the agenda: Adding issues, deferring or eliminating others, and influencing the order in which issues get negotiated • Framing and reframing: Influencing your counterparts’ under- standing of what is at stake and what is possible • Controlling information: Influencing who gets access to which information and when • Forcing and delaying action: Imposing deadlines and other kinds of time pressure that force your counterparts to make hard choices • Developing a sequencing plan: Deciding on the order in which you will deal with other parties and make moves in linked negotiations These strategies are implemented through a mutually rein- forcing mix of actions at and away from the negotiating table. Away from the table, you can influence who participates and im- 54 BREAKTHROUGH BUSINESS NEGOTIATION prove your BATNA. Controlling the agenda and framing (or re- framing) the basic problem calls for face-to-face interaction. Will Claire be able to use these tools to level the playing field and cor- rect her previous missteps? We’ll look at some of the moves avail- able to her and then work out a sequencing plan. Changing the Players A particularly potent way to shape the game is to influence who plays. 1 One method of doing this is to invite other players into the negotiation. Claire could consider inviting the bank into her negotiations with Eric. She can’t do a deal with Eric unless she gets approval from the bank; her credit officer could bolster her case by saying to Eric, "We can’t provide funding for this project if you [BargainMart] insist on these conditions." This maneuver could in turn help generate some creative agreements. For ex- ample, Eric might agree to help Claire find an alternative source of funding or provide some sort of guarantee. At the same time, Eric might be able to convince the bank to relax its constraints. Note that Claire has positioned herself here as a kind of intermediary in negotiations between BargainMart and the bank; by changing the players, she has changed the game. She can support the bank on some points and Eric on others, all the while working to advance her substantive agenda. Of course, there are potential costs: by inviting in other players, Claire gives up some control over the process. Inviting in parties is one way to change the players; working to exclude parties is another. Sometimes, though not in Claire’s situation, it is advantageous to try to prevent parties from partic- ipating or to remove them from the game. In coalition-building situations, for example, it may be possible to marginalize implac- able opponents in order to withhold from them the standing and opportunity to wield veto power. In some complex multiparty ne- gotiations, there are simply too many participating parties to make expeditious progress. It may be possible to convince some to allow SHAPING THE STRUCTURE 55 themselves to be represented by others as a way of reducing the core of negotiators. PRACTICAL APPLICATION : CHANGING THE PLAYERS Return to the negotiation you began to analyze in Chapter One, and answer the following questions: • Could it be advantageous to invite other parties into the negotiation? • Would it make sense to bring in a mediator? • Are there parties involved that you might be able to exclude? • If there are too many parties, can you convince some to allow themselves to be represented by others? BATNA Building Good alternatives to agreement are rarely lying around in plain sight, ripe for the picking. A more typical scenario is that your BATNA must be painstakingly built, maintained, and improved. But what if, like Claire, you are on the wrong side of a power im- balance? She runs a small, untested company, and this deal is cru- cial for her. Eric represents a large and respected retailer for whom this is one deal among many. Claire has no obvious way to influ- ence Eric’s BATNA unilaterally or to improve her own. What can she do? Actually, Claire can do a lot to strengthen her alternatives (and weaken Eric’s) before she resumes negotiations. But she has to think carefully and take some actions before returning to the table. Specifically, she should consider activating the latent power of com- petition, coalitions, and constraints. Promote Competition. To harness the power of competition, Claire could have cultivated alternative negotiating partners and con- ducted competitively linked negotiations with them. Even now, it 56 BREAKTHROUGH BUSINESS NEGOTIATION may not be too late to do so. How would Eric’s perception of his al- ternatives shift if Claire opens negotiations with BargainMart’s arch-rival, ValueShops? It depends on the threat posed by Value- Shops’ interest, which in turn depends on the uniqueness of what Claire has to offer. Suppose that (1) ValueShops and BargainMart are locked in a fierce battle for market share, (2) Claire controls a very attractive site in an untapped market, and (3) the presence of one would effectively shut out the other. This combination of fac- tors would substantially strengthen Claire’s potential bargaining power: it would simultaneously worsen Eric’s BATNA and improve Claire’s. Build Coalitions. In a situation like Claire’s that involves more than two parties, coalitions can profoundly alter all the parties’ BATNAs. A supportive coalition consisting of an attractive set of satellite stores would enhance Claire’s ability to influence Eric. She might begin by negotiating with a few high-quality satellites, eventually making them conditional commitments along the lines of "Assuming that I’m successful in getting BargainMart, would you be interested in coming on board?" With a critical mass of conditional commitments, she can then go back to BargainMart to say, "If you are willing to sign on, I can deliver this very at- tractive set of satellites." At the same time, Claire can use the ex- istence of the coalition of satellites to persuade Eric to be more flexible on use, assignment, and subletting by arguing, "They won’t be willing to sign on unless they get assurances concerning non- competition in the event that you decide to alter your strategy, or to sublet portions of the space." Once Claire has BargainMart’s commitment, she can return to negotiating over terms with the satellites. Relax Constraints. When two negotiations must both reach fruition for an overall deal to go forward (reciprocal linkage), con- straints in one negotiation can paralyze the overall deal. The key is to look for ways to loosen the most binding constraints. What are the most pressing constraints that Claire has to contend with? SHAPING THE STRUCTURE 57 The time pressure she is under because the option will run out and the restrictions imposed by her bank. To relax these constraints, Claire could negotiate with the landowner to extend her option on the land. She could also explore whether other sources of fi- nancing might offer more flexible conditions. She might even talk to several financing sources in parallel, once again drawing on the power of competition to improve her position. Successfully relax- ing the constraints on timing and financing will simplify her deal- ings with Eric. At other times, constraints in one negotiation can actually help you claim value in others. If the bank is unwilling to be more flexible, Claire can try to invoke the bank’s requirements to con- vince Eric that he must be more flexible. Eric, in turn, can use constraints imposed by his boss (real or feigned) to convince Claire that he can’t make concessions. Both would thus be using the con- straints they face in a linked negotiation to bolster the credibil- ity of their commitments to their positions. PRACTICAL APPLICATION : BUILDING ONE ’ S BATNA • How can you build your BATNA and (possibly) weaken the BATNA of your counterpart? • Can you use the power of competition to strengthen your position? • Can you build supportive coalitions? • Can you relax binding constraints in linked negotiations or use them to bolster your commitments? Setting the Agenda It is crucial to have an impact early when the agenda is being set— when what will and won’t be negotiated is being defined—before momentum builds in the wrong direction, or irreversible commit- ments are made, or too much time passes. Breakthrough negotia- tors treat the agenda not as fixed but as something that can be 58 BREAKTHROUGH BUSINESS NEGOTIATION shaped. "Pay great attention to the agenda of the debate," cautions one experienced commentator on negotiation: "He who defines the issues and determines their priority is already well on the way to winning. . . . It is just as important, and on the same grounds, to deny your opponent the right to impose his language and con- cepts on the debate, and to make sure you always use terms that reflect your own values, traditions, and interests." 2 Skilled negotiators typically negotiate over the agenda early on, seeking to define certain issues as nonnegotiable and to set pre- conditions before negotiating the substance. The Israelis declare that Jerusalem will remain their undivided capital; a union leader states that she will not consider pay-for-performance systems; Eric asserts that use, assignment, and subletting are effectively non- negotiable. Negotiations over process details, such as where the ne- gotiations will take place and who will represent the sides, also take place early on. Agenda setting often takes place during a prenegotiation session and sometimes continues at the negotiat- ing table. As we have seen, it is sometimes possible to create value by broadening the agenda to allow for mutually beneficial trades. Claire’s diagnosis suggested the possibility of getting BargainMart to help with financing for the project. Claire could therefore try to add financing to the agenda by inquiring whether BargainMart would help her secure financing from a more flexible source. Suc- cess in doing this could allow her to give BargainMart more lati- tude on use, assignment, and subletting—and to create joint gains. Agenda setting sometimes involves (though not in this case) postponing toxic issues or eliminating them from consideration. Inclusion of toxic issues can stymie progress on the rest of the agenda. If they can be deferred, agreement may be possible on the other issues. In a negotiation over a merger, for example, the ques- tion of who fills which positions in the combined entity is often left to the end. That way, both sides can more fully appreciate the benefits of the combination before grappling with the very difficult issue of control. Here again, early negotiations over the agenda SHAPING THE STRUCTURE 59 can help to build momentum and prevent barriers from sabotag- ing the entire process. PRACTICAL APPLICATION : SETTING THE AGENDA • How did the agenda get defined? • Who had the most influence in defining the agenda, and how did they influence it? • Could you have added issues in order to expand opportunities for mutually beneficial trades? • Could issues have been deferred or excluded to eliminate barriers to agreement? Framing and Reframing Framing is defining the problem to be solved and the set of poten- tial solutions in a favorable way, by means of argument, analogy, and metaphor. 3 Skillful framing resonates with the target audience, evoking images and emotional reactions that influence the behav- ior of your counterparts, constituents, and other influential parties. Efforts to frame (or reframe) often consist of coordinated actions both at the negotiating table (by means of argument) and away from the table (such as through use of the media). Negotiators often compete in a frame game—attempting to define the dominant frame for the negotiation, not only to per- suade each other but also to influence the perceptions of other in- fluential parties. Consider, for example, the efforts of a coalition of U.S. pharmaceutical, software, and entertainment companies in the early 1990s to win stronger protection for their intellectual property. 4 These companies were losing billions of dollars annu- ally because of copying of drugs, computer programs, videos, and CDs in China, India, and other countries. Although copying was legal in those countries, the coalition undertook a campaign to label it as intellectual piracy, thus invoking powerful images of plunder and illegitimacy. The developing countries tried to frame 60 BREAKTHROUGH BUSINESS NEGOTIATION the situation in terms of fairness, arguing that control of technol- ogy was a new form of colonialism. But the piracy framing stuck because it resonated with such key audiences as the U.S. Con- gress, the administration, and the press, and it strengthened ef- forts to build a supportive coalition in the United States, Japan, and Europe. The net result was agreement at the 1994 Uruguay Round of the General Agreement on Tariffs and Trade negotia- tions on a sweeping new set of global rules protecting intellectual property. Framing is a particularly potent tool when your counterparts haven’t yet decided what is at stake or fully developed their posi- tions. By providing a compelling frame of reference that defines the problem (such as piracy) and a set of criteria for distinguish- ing good outcomes from bad, skilled negotiators can gain ad- vantage at the start. Framing tactics work because (1) people’s assessments of what is at stake tend to crystallize only when they confront the need to make choices, and (2) the conceptual frame- works, or mental models, that people employ to make sense of a situation depend on how that situation is presented to them. 5 As the intellectual piracy example illustrates, the art of framing is a matter of defining the problem and the options in ways that tap into particular preconceived beliefs and attitudes, elevating the importance of some interests and leaving others dormant. Reframing is necessary when the existing frame has become a barrier to agreement. 6 Claire’s diagnosis of the situation suggests that Eric has framed their negotiation in purely value-claiming, win-lose terms. He is not open to creative solutions or joint prob- lem solving. He probably thinks he holds all the cards, which is why he is taking such a hard line. But she has pinpointed several promising opportunities for joint value creation. What can Claire do to reframe Eric’s view of the problem and the options? As a start, she can try to convince him that no agreement is possible if he continues to approach the negotiation in this way. Persuasive arguments are sometimes enough to accomplish this. What is the best argument Claire can make to convince Eric that BargainMart’s standard clause can’t be the basis for agreement? It SHAPING THE STRUCTURE 61 would probably be most effective to point out the external con- straints she faces. She could say to Eric, "If you insist on this clause, it won’t be possible to go forward with the project. I won’t be able to get financing, and I won’t be able to convince satellite stores to sign on. I personally don’t care that much about the provisions on use, transfer, and subletting. But we have to address the concerns of the bank and other potential tenants in order to move things forward." If argument alone is not enough, Claire can leverage her BATNA-altering efforts to reframe the proceedings. Claire might tell Eric straightforwardly that she has extended her option on the land and begun discussions with ValueShops, putting him on no- tice that she has an alternative to dealing with him. Once Eric is "unfrozen," she can work to plant a new concep- tual structure in his head. For instance, she could prompt him with a suggestive model for joint gains that illustrates how differences in interests can create value: "I understand that you need some flex- ibility to alter your business to respond to changing conditions, but I can’t give you unlimited flexibility. Also, I’m concerned about the short term, while you seem to want long-term flexibility. Perhaps we can reach a compromise that gives you more flexibility later on." Finally, successful reframing often calls for helping your coun- terparts find face-saving ways to back away from their positions gracefully. Claire could say to Eric, "I understand BargainMart has a policy on these issues, and you’re obligated to uphold it. But sure- ly there have been other special situations in which you’ve made exceptions. We’re a young company and don’t have the same bar- gaining power with banks and satellites that larger developers do. Perhaps you could confer internally on this." PRACTICAL APPLICATION : FRAMING AND REFRAMING • How did the problem and the options get framed? • Who was most influential in establishing the dominant frame, and how did they go about it? 62 BREAKTHROUGH BUSINESS NEGOTIATION • Did you overlook opportunities to reframe the game? What might you have done differently? Controlling Information Power flows to those who control other parties’ access to infor- mation. 7 Information control techniques are especially potent when you have private access to valuable information (which makes sharing versus withholding it a key decision) and when ne- gotiations involve multiple parties and interlocking levels of deci- sion making (which makes who to share it with, and when, highly significant). Consider, for example, Claire’s linked negotiations with ValueShops and BargainMart. Neither knows that she plans to conduct these negotiations in parallel, so Claire has an infor- mational advantage: she knows something important that the other players don’t. When and how should she reveal this information, given that it is clearly in her interest to do so at some point? Suppose she could start over and decided to negotiate first with ValueShops. Should she reveal that she planned to negotiate with BargainMart too? Not right away, because she would want Value- Shops to feel invested in these negotiations and hence to make an attractive offer (which she can then shop to BargainMart). If Val- ueShops asked, she could have truthfully answered that she ap- proached them first and that her next steps would depend on how things go in their discussions; the specter of BargainMart need not have been raised explicitly at this point. Now suppose that her initial discussions with ValueShops went well. Should she proceed to negotiate a detailed agreement with ValueShops? Probably not. Instead, she might say she that had some thinking to do and open up dialogue with BargainMart. Should she then reveal to BargainMart that she had been talk- ing to ValueShops? Yes—but she should frame her message with care. She could say, truthfully, that she had had some initial dis- cussions with ValueShops, but that they had not reached the point of serious negotiation. She could also reveal her preference for a SHAPING THE STRUCTURE 63 deal with BargainMart and work at launching serious negotiations with them, while making clear that she planned to continue her discussions with ValueShops. If things went well with Bargain- Mart, she might solicit a detailed offer. But if progress bogged down, she could return to ValueShops and let BargainMart know that she was doing so. Once she had an offer from BargainMart, she could communicate it to ValueShops to see if she could get substantially better terms, and so on. In this way, Claire could use her position as a bridge between linked negotiations to shape the perceptions of other players. Broadly speaking, information control relies on several types of techniques: • Sharing information selectively. As Claire has demonstrated, privately held information and analysis can be employed as a tool to shape the beliefs and attitudes of other parties. This type of in- formation control is a matter of "withholding information, releas- ing information at pre-determined times, releasing information in juxtaposition with other information that may influence percep- tions, . . . [and] communicating information to selected audiences." 8 • Influencing patterns of communication. Another form of in- formation control consists of encouraging or discouraging com- munication among other parties to the negotiation. Convening potential allies—such as, in Claire’s case, a group of prospective satellite tenants—can have a potent effect on coalition building. Although not the case in Claire’s situation, it is sometimes also pos- sible to disrupt potential opponents’ efforts to communicate and organize. • Drafting agreements. The question of who will draft agree- ments provides another opportunity for information control. If Claire can convince Eric to let her draft the first comprehensive written proposal, she will gain some control over how key provi- sions are phrased. As one experienced corporate deal maker put it, "We always do the drafting, partly because we think we are bet- 64 BREAKTHROUGH BUSINESS NEGOTIATION ter at it. These are very complex deals, and your ability to do the drafting gives you an advantage." Efforts to control who gets access to what information often go hand in glove with decisions about issue sequencing, or the order in which issues get negotiated. Issue sequencing can have a pow- erful impact on your ability to create and claim value. In multiparty situations, furthermore, the sequence in which issues get negoti- ated can influence the formation of coalitions. By focusing on an issue that divides potential opponents early on, you can sometimes forestall formation of a blocking coalition; and opening with an issue on which you and potential allies agree may help to seal a win- ning coalition and build momentum. 9 Consider Claire’s linked negotiations with BargainMart and with potential satellite tenants. It would probably make sense for her to try to get some good satellites on board before talking to Bar- gainMart. She could then reveal to Eric that she has provisional agreements, thus influencing his perceptions of the attractiveness of the deal. But should she negotiate a full set of terms with the satellites before negotiating with BargainMart? Probably not, be- cause the satellites would press for more attractive terms if they knew she had not yet signed BargainMart. Instead, she might ne- gotiate over the basic outlines of an agreement with key satellites, then do a deal with BargainMart, and finally return to negotiate the details with the satellites—an example of bootstrapping. PRACTICAL APPLICATION : CONTROLLING INFORMATION • Did you have (or could you have had) access to important information that other parties lacked? • Would it have been more advantageous to share that information or to withhold it? • When was the best time to reveal what pieces of information? SHAPING THE STRUCTURE 65 • Could you have advantageously promoted or impeded communication among other parties? • Could you have exerted more control over the drafting of agreements? • How might information control have been synchronized with issue sequencing? Forcing Action or Buying Time Deadlines and other forms of time pressure can effectively build momentum toward agreement. 10 Claire is facing a serious action- forcing event: she has to do the deal before her option on the land runs out. Meanwhile, though, she may be able to engineer her own action-forcing events to induce Eric to make hard choices. Linkages among negotiations offer one way for Claire to cre- ate time pressure. Suppose she gets ValueShops to make an at- tractive offer and then communicates it to Eric. Claire may then be able to propose an exploding offer: a take-it-or-leave-it pack- age linked to a deadline for acceptance or rejection. In response, Eric could feel compelled to make a concession. Action-forcing events play a role in internal decision-making processes as well. If Eric is facing internal resistance to relaxing company policy, Claire’s efforts to force action by negotiating with ValueShops may actually help Eric to move things forward. In this and other ways, negotiators explicitly or implicitly collude to build momentum. Similarly, the need to complete one set of negotiations before undertaking another (sequential linkage) can be used either to stimulate action or to excuse delay. Success in driving the first set of negotiations to completion may stimulate action in the follow- on set. Similarly, delaying completion of one set of negotiations may effectively delay the second set of negotiations. Negotiators frequently use delay to buy time for their alter- natives to improve, or for others’ interests to shift. When an action- forcing event is disadvantageous, you should look for ways to relax 66 BREAKTHROUGH BUSINESS NEGOTIATION its hold over you. If Claire can extend her option on the land, for instance, she will gain time to make other structure-shaping moves. Of course, your counterpart may try to prevent such moves. Eric could try to wriggle out of Claire’s exploding offer, for example, by accepting it "provisionally" and asserting that he has concerns he has to raise with higher-ups, attempting to use a ratification tactic. Action-forcing events need not be deadlines. Simply calling a meeting or scheduling the right telephone call can sometimes serve to force action. PRACTICAL APPLICATION : FORCING OR DELAYING ACTION • What forced action to occur? How were the parties (including you) induced to make the hard choices necessary to reach agreement? • Who was more effective at shaping the pace of the process, you or your counterparts? • Could you have used action-forcing events to build momentum? • If you were subject to time pressure, could you have relaxed its impact on you? Developing a Sequencing Plan Claire has already begun to develop a sequencing plan that moves the process in desired directions, as we saw in our discussion of her dealings with ValueShops and BargainMart. 11 Now she is ready to flesh out her sequencing plan in more detail, working out the se- ries of moves she will make to create momentum in the linked sys- tem of negotiations. Her first move (M 1 —that is,Move 1—in the figure on page 68) should clearly be to buy more time by negotiating to extend the op- tion on the land. Making this a top priority is in keeping with a basic rule of thumb for sequencing: seek to relax your most binding SHAPING THE STRUCTURE 67
constraints early on. If you can’t do that, you may not have the time or resources to work through the rest of your plan. If Claire can get an additional six months, life gets a lot easier. Her next move should be to talk to local government about building the infrastructure to support the mall, such as roads and utilities. She might also explore whether she can get a tax break. It’s important for Claire to talk to the municipality before she goes too far down the road with the project. Key officials must be- lieve that the community has something at stake in making the project work and not be presented with a fait accompli. If Claire already had all the details wrapped up and agreements signed with BargainMart and the satellites, the town would know she was ir- reversibly committed and would have no incentive to make con- cessions. This is an example of another sequencing principle: nail down agreements with parties who have a strong stake in the outcome early, before you are committed to going forward regardless. Her third move is to talk to the bank and other possible sources of financing. The agenda here is not just to see if the bank will loos- en its requirements, but also to clarify precisely what those re- quirements are. This move embodies another general sequencing rule: seek to solidify advantageous external constraints, and then lever- 68 BREAKTHROUGH BUSINESS NEGOTIATION Claire BargainMart Bank Land Owner ValueShops Satellites Local Government Eric Eric’s Boss M 6 M 5 M 4 M 2 M 3 M 1
age those constraints in linked negotiations. If Claire can go to Eric with an iron-clad set of conditions from the bank, she will be well situated to get him to back away from his position or to help her come up with a creative option. Her fourth move is to begin to build a coalition of satellites by launching exploratory negotiations with them. Here too, se- quencing matters. Claire should think carefully about the order in which to approach potential allies, keeping in mind another prin- ciple of sequencing: once you have the right initial ally or allies, it is easier to recruit others. She should begin by thinking through who defers to whom on a given set of issues—or, to put it another way, who is likely to be swayed by whose endorsement? This kind of sequencing transforms uncommitted parties’ per- ceptions of their BATNAs. Initially, their options are twofold: to join your coalition or not. Once you have assembled a critical mass of support, they face quite a different choice: to join the coalition or be left behind. This is the critical mass principle at work: as your likelihood of prevailing grows, recruiting becomes increasingly easy. Claire might decide to approach a highly respected satellite first and then leverage its support. Alternatively, she might choose to recruit a few very good satellites first, to create a bandwagon ef- fect, and only then approach the tougher-to-recruit ones. Then, with a better grasp of her constraints and resources, she will be in a stronger position to open up dialogue with ValueShops (M 5 ). And not until this point would she go to the table to negoti- ate with Eric (M 6 ). As we have seen, Claire can potentially gain lev- erage by sequencing back and forth between these competitively linked negotiations. This strategy illustrates yet another sequenc- ing principle: preserve your options in competitively linked negotia- tions as long as possible. Eventually, Claire will have to do a deal with BargainMart or ValueShops, so at some point she will have to break off one of these negotiations. But if she does so too early, she leaves herself in a more vulnerable position, like the one she got into by negotiating only with BargainMart in the first place. This is not the only feasible sequence of moves open to Claire, but it’s a good initial plan. Naturally, Claire should keep in mind SHAPING THE STRUCTURE 69 that other players will also try to shape the game, and she should be prepared to respond to events flexibly. The first mover has an important advantage, so it’s well worth the effort to try to antici- pate others’ moves and get there first. At the same time, you should try to forestall reactive coalition building. If other parties are alarmed by your coalition-building moves, you may provoke formation of a blocking coalition. You should also be prepared to respond to your counterparts’ efforts to use sequencing to undermine your position in linked ne- gotiations. For example, Eric may be negotiating over another site, elsewhere in the area, without Claire’s knowledge. He could even be dragging out his negotiations with her to prevent her from doing a deal with someone else until he completes the other ne- gotiations. PRACTICAL APPLICATION : DEVELOPING A SEQUENCING PLAN • How effective were you at planning a sequence of moves that advanced the process in favorable directions? • Could you have exploited patterns of deference? • Were there opportunities to sequence in building coalitions? • What might you do differently the next time? CHANGING THE GAME At the beginning of the chapter, Claire appeared to be disadvan- taged by her own initial missteps. But if she implements the cor- rective plan she has developed, she will be in a much stronger position. Claire will have leveled the playing field by purposefully shaping the structure—by changing the players, altering BATNAs, setting the agenda, reframing Eric’s view of the process, control- ling the flow of information, forcing and deferring action, and de- veloping a promising sequencing plan. 70 BREAKTHROUGH BUSINESS NEGOTIATION Now that you are familiar with shaping the structure of a ne- gotiation, we will take a close look at the next core task: managing the process of interacting with your counterparts across the table. SHAPING THE STRUCTURE 71

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