Ben Fiorentino had long been expecting an offer to buy his family’s business. FHE (originally Fiorentino Heavy Equipment), founded by Ben’s father, Tony, was an Indianapolis-based regional distributor of industrial equipment. With annual sales of $220 mil- lion and just under three hundred employees, FHE had thrived under family management for nearly forty years. After his father’s death fifteen years earlier, Ben had taken the reins as chairman and CEO, leading the company through a period of sustained growth. But Ben could feel the winds of change in his industry. Larger companies were buying and consolidating regional distributorships like his to gain advantages of scale—the classic rollup strategy. It had become clear to Ben that FHE could not survive long term as an independent business. He could stave off competition for a while, but it was just a matter of time. When Ben was approached by Argus Corporation, a leader in the trend toward consolidation, it was almost a welcome devel- opment. Argus already owned a similar distributorship in an adja- cent region (and sometimes competed with FHE at the intersection of the two regions), so FHE was a natural fit for them. Although pained, Ben concluded that it would be best to sell—and relatively soon, while he could still get a good price. His father had wanted, above all, financial security for the family. Tony 189 190 BREAKTHROUGH BUSINESS NEGOTIATION had always seen the business as a way to achieve that, not an end in itself. Properly invested and overseen, the proceeds of the sale could sustain the family for the foreseeable future, and probably less divisively than the business had. As the family had grown and the third generation had joined the company, conflict had in- creased (though it was scrupulously confined to biannual family meetings and never aired in public). Ben was also ready to move on himself. In his early fifties, he was prepared to spend a few more years running the business but wanted to pursue other interests. Getting the family to agree to sell would be an uphill battle. Ben’s two siblings were emotionally attached to the business and to its employees. His sister, Leslie, had never been active in the company, and she and Ben were close. But her husband had been CFO until his sudden death three years earlier, and he had been strongly invested in its success. Two of Leslie’s three children also worked for the company, and the oldest planned on a career there. (Ben’s own two children had gone into other professions.) Potentially more problematic was Ben’s brother, James, who held a midlevel position in the company. James had no higher as- pirations, but his older son worked at FHE and aspired to run it. James’s position in the business had anchored him through a tur- bulent personal life, and a decision to sell would represent a pro- found change for him. Ben and James rarely saw eye to eye on business issues, politics, or anything else. Legally, Ben needed the support of either Leslie or James, not both, to sell the business. But a decision based on anything less than consensus would be wrenching. Then there was the related question of whether and how to involve the third generation in the decision. As part of an estate planning initiative, FHE had created two classes of stock. The nonvoting stock, which represented 70 percent of the economic value of the business, had been split evenly among the members of the third generation. Ben, Leslie, and James had retained all the voting stock, evenly apportioned among them. This arrangement gave them control, but their shares represented just 30 percent of the economic value of the company. The seven members of the third generation, all in their late teens and twenties, thus had no clear-cut legal right to participate in the decision-making process, but they would have an influence. Three were active in the business and had expressed varying de- grees of interest in running in it. The other four showed no in- terest in the company other than receiving dividends. Ben believed that they would be happy to see the business sold, since their fi- nancial futures would be secured and the increasingly divisive fam- ily meetings would end. Finally, there was the question of the role that FHE’s profes- sional managers should play. After the death of Leslie’s husband, Ben had hired an experienced outside manager as CFO. Vice pres- idents of sales, operations, and human resources also reported to him. All earned competitive salaries and participated in the profit- sharing plan Ben’s father had established twenty years earlier. Even if he could elicit buy-in from the family to negotiate a sale—which was not a foregone conclusion—it was unclear to Ben how to go about managing the process. He had no prior experi- ence with mergers and acquisitions, nor did anyone else at the company. Who should participate in the negotiations? What ex- ternal advice, if any, should he solicit? How should the process be run? What role should he play? This chapter will explore leadership in negotiation, looking in particular at how negotiators lead when they represent others and when they orchestrate teams. REPRESENTING OTHERS When a negotiator represents the interests of others, those who are absent from the table could be principals with decision-making power (such as the CEO of a company being represented by a business-development executive) or constituencies who expect LEADING NEGOTIATIONS 191 192 BREAKTHROUGH BUSINESS NEGOTIATION the representative to lead them (such as the members of a union bargaining unit being represented by their elected leader). 1 The internal interests being represented may be monolithic or frac- tious. And the representative may function as a pure agent or pur- sue personal interests in tandem with others’ interests. Whatever the scenario is, the representative functions as a bridge between internal decision making and external negotia- tions. 2 When negotiators participate in shaping their mandates, have an unwavering vision of what they want to achieve, and work to shape perceptions internally and externally, they maximize their ability to advance their side’s interests—and their own. Representational Roles and Dilemmas Negotiators who represent others enjoy considerable leeway in how they exercise leadership. 3 To be effective, though, representatives have to understand the roles available to them and shape the roles they play. 4 This is largely a matter of confronting and managing several characteristic dilemmas that test their leadership. Representing Others Versus Representing Oneself. Represen- tatives may or may not have their own legitimate interests in the outcome of a negotiation. At one extreme, as illustrated in the fig- ure on page 193, a representative is a mere agent of others with no independent interests; at the other extreme, the representative is the principal decision maker, someone who has the legitimate authority to participate in making decisions. In between, a rep- resentative operates as a partner of other decision makers who are not at the table, representing both their interests and his or her own. This is the role that Ben would play in a negotiation with Argus. He has decision-making authority as well as his own in- terests, which may not be perfectly aligned with those of his sib- lings or the company’s professional managers. Operating in the middle of this spectrum, Ben is certain to confront a principal-agent problem: his interests and the interests of those he represents are not perfectly aligned. 5 His ability to con- trol the flow of information and shape perceptions could allow him to create and claim value in ways that serve his personal interests and not those of other constituencies. This enviable position may generate distrust on their part. The more he tries to create value at the table by identifying creative trades, for example, the greater the likelihood of generating suspicion in his constituents that he is doing so to further his own interests. Given the long-standing tension between Ben and his brother, James, and the potentially incompatible interests of the third generation, Ben must prepare to confront this dilemma. It is likely, for example, that a deal with Argus will provide for Ben to stay with the company for a couple of years to ensure con- tinuity. He has a personal interest in maximizing his salary and performance-based bonus, but must avoid the appearance of giv- ing Argus too favorable a deal in return for a good package. Representing Stated Interests Versus Best Interests. At one ex- treme, as shown in the accompanying figure, a representative acts as a mere agent, seeking only to gain a mandate and to understand his principals’ stated interests and instructions. He acts on these instructions and conveys at-the-table offers to the principals for ratification or revision. At the other extreme, the representative acts as a visionary leader, profoundly shaping his constituents’ perceptions of their best interests in response to external realities. Between these two LEADING NEGOTIATIONS 193 Representing Others Versus Representing Oneself Representing others’ interests Agent Partner Principal Representing own interests poles, the representative functions as an educator to help the prin- cipals understand what their best interests are. Because Ben must convince his family and the professional managers that selling the business is in their best interests, this is the role that he must play in any negotiation with Argus. Representatives in a position to shape their constituents’ per- ceptions of their interests encounter another dilemma. If Argus viewed Ben as unable to budge his constituents, he could plausi- bly portray their positions as rigid and could use the need to sat- isfy them as a tool for claiming value. But it would be hard for him to create value because he wouldn’t be able to demonstrate flexi- bility in exploring options without damaging his credibility. Conversely, if Argus viewed Ben as highly influential with his constituents, he would come under increasing pressure from Argus to influence them. He would be in a stronger position to create value, but less able to claim value by using ratification tactics. To the extent that Ben is seen by the family and FHE’s man- agers as having a personal interest in the outcome of the negoti- ation, his ability to influence their perceptions will suffer. If his constituents don’t trust him to act in their best interests, they are likely to resist his efforts to educate them about external realities. Representing Unified Interests Versus Incompatible Interests. When internal interests are unified, a representative can simply act as a straightforward agent of those interests. If internal interests 194 BREAKTHROUGH BUSINESS NEGOTIATION Representing stated interests Agent Educator Visionary Representing best interests Representing Stated Interests Versus Best Interests are fractious, as the accompanying figure illustrates, the repre- sentative has to act as a coalition builder, allying with some sub- set of people inside. Between the two extremes, the representative acts as an internal mediator in an effort to craft consensus po- sitions. Ben will initially act as a mediator in an effort to gain support for selling the business. He will try to integrate the interests of all family members, develop creative options, and craft a consensus position on sale of the business. But what if some members of the family implacably oppose a sale? What does he do then? One op- tion is to drop the plan to sell. But Ben believes that this outcome is not in the best interests of the family. It would also hold every- one hostage to the veto of the most opposed family member. Ben might have to shift to building a coalition that alienates some members of the family. It is essential that Ben establish workable decision rules gov- erning how the family will reach closure on a decision to sell. This means drafting a set of rules that is perceived as fair and getting the family to agree to them. Because the decision rules are likely to have a decisive impact on the ultimate outcome, Ben must craft them with care and expect vigorous debate. The battle may be lost or won here. He should therefore (1) use arguments about fairness to shape family members’ perceptions of their interests, (2) raise the cost of disagreement by building a coalition in support of ex- ploring options, and (3) isolate the opponents. LEADING NEGOTIATIONS 195 Representing Unified Interests Versus Incompatible Interests Representing unified interests Agent Mediator Coalition builder Representing incompatible interests Ben’s efforts to build internal consensus could constrict his flex- ibility in external negotiations: the terms on which the family reaches consensus may be too extreme for the other side. For this reason, it might be best for Ben to postpone trying to build inter- nal consensus. The risk of postponement, however, is vulnerabil- ity to being divided and conquered. Ben will have more flexibility in his negotiations with Argus if he doesn’t push for early consen- sus, but he will face more internal disagreement when he brings the family a proposed deal. Conversely, if he pushes for early consen- sus within the family, he will enjoy less flexibility in external bar- gaining but will have an easier job ratifying a proposed agreement. This dilemma is most acute when a representative attempts to function as a mediator. If Ben has to reconcile diverse internal interests, he may want to maximize his internal flexibility by un- dertaking exploratory talks with Argus and developing an attrac- tive package before pressing for internal consensus. But he will risk looking unprepared or weak in external negotiations. Ben may de- cide instead to abandon hope of an internal consensus and work at building a partisan coalition in the family to maximize his ex- ternal flexibility. The Representational Role Grid. The three dimensions along which representational roles vary can be combined and depicted in the three-dimensional grid on page 197. All three dimensions are anchored by the role they share: that of agent. The situation con- fronting representatives can be diagnosed by first identifying where they lie on the three axes and then assessing the corresponding challenges. Because of his role in the family, Ben will have to op- erate close to the middle of the representational role grid. He will act as a partner, representing his own interests as well as others’. He will have to educate his constituents about their best interests. And he will function, at least initially, as an internal mediator. Shifting Among Roles. As the negotiation proceeds, Ben may de- cide to shift roles. If he concludes that consensus is impossible and 196 BREAKTHROUGH BUSINESS NEGOTIATION that less-than-unanimous agreement is more desirable than no deal, he might stop acting as an internal mediator and become a coalition builder. He must be careful, however: shifts among roles are not always reversible. Once he has sided with a particular coali- tion in the family, it will be impossible for him to revert to being a neutral mediator. With a better understanding of the representational challenges Ben faces, take a couple of minutes to think about what you would do in his situation. What would your goals be, and what actions would you take, in what order, to achieve them? LEADING NEGOTIATIONS 197 Agent Champion Coalition builder Mediator Visionary Partner Principal Representing others Representing self Stated interests "Best" interests Unified interests Incompatible interests Representational Role Grid
Building Momentum Ben’s ultimate goal is to sell the business at a good price. To build momentum toward that goal, he should structure the process in three phases: securing a mandate from the family, getting the pro- fessional managers on board, and then structuring and leading the team in negotiations with Argus (and possibly others). Securing a Mandate. In the first phase, Ben’s objective is to se- cure a mandate to explore sale of the company, without anyone having to commit to do so. It will be hard for opponents of a sale within the family to argue against simply exploring options. Once exploration is under way, it is likely to create its own momentum; this is a splendid example of entanglement. Ben should begin to educate his family about the risks of not selling the business and make the case for doing so at the right price. Above all, he wants to discourage early formation of a block- ing coalition. Such a coalition could consist of James, James’s son, and one or more of Leslie’s children. But because there is no sign of implacable opposition at this point, Ben should avoid actions that will generate reactive coalition building. Ben should use a mix of shuttles and summits to build mo- mentum. He should probably begin with one-on-one discussions, first with Leslie and then with James, followed by a three-way meeting. Then he should organize a full-family meeting to solicit approval to explore a sale. Before meeting with Leslie and James, Ben should think about how to frame the argument for each. Leslie will probably trust Ben’s assessment of the business realities, but she may feel emo- tionally resistant to selling her father’s company. Ben should stress that, above all, their father wanted financial security for his fam- ily and that it is their financial security that is at risk; he could re- mind her of specific remarks their father made. She will also be concerned about her son’s future. Ben should stress that a sale would have to include a transitional arrangement for family mem- bers to continue to work in the business for a year or more. 198 BREAKTHROUGH BUSINESS NEGOTIATION Ben should use similar arguments with James. But he should stress the need for outside assessments of the future of the business in order to blunt possible suspicion that Ben simply wants to get out. He should also spell out the financial benefits of a sale at the right price. Assuming that the business could be sold for a price of roughly 1 x annual sales, it would net roughly $200 million. Since the company has negligible debt, this price would translate into $20 million each for James and his children. Meeting individually with every member of the third genera- tion would take too much time and might create the appearance that Ben is playing politics. Instead, he should ask his siblings to discuss the issues with their children. (They would do so anyway.) He should then convene a family summit meeting as soon as is practical (leaving no time for misperceptions to build up or coali- tions to form). Meanwhile, he should talk with his own children to be sure they are on board. If his children are friendly with cous- ins who don’t work in the business (and who thus might be more likely to support sale), he could encourage his children to sound them out; they should wait a few days to do so, to give Ben’s sib- lings time to talk with their children first and to avoid the per- ception that Ben is coalition building. This will help Ben get a sense of where things stand. Ben’s goals for the family summit meeting are to (1) present a clear picture of the business’s current situation and details of Argus’s overture, (2) lay out the potential costs and benefits of a sale, (3) get buy-in for hiring advisers and exploring possibilities, and (4) agree on decision rules for the ultimate decision. The is- sues should be dealt with in this order. Ben should stress that none of these steps commits them to sell the business, but that they need clarity about what their options are. The crucial step, as we have seen, is to secure agreement on the decision rules. Ben could accomplish this by framing the first key decision—whether to hire professional advisers to help the family value the business and to advise them on dealing with Argus—and using that decision to engineer agreement on a LEADING NEGOTIATIONS 199 decision process. Specifically, he should propose a decision rule of sufficient consensus, not unanimity. Otherwise, the most opposed individuals can veto sale of the company. Sufficient consensus could consist of a two-thirds majority of the family, including both the second and third generations. Because each individual effec- tively owns 10 percent of the company’s value, he can argue that this is a fair way to pro
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 Iklé 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
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 Iklé 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
Building Coalitions
After fifteen years of steady advancement at a leading durable- goods manufacturing company, Dana Monosoff decided to move on. Recruiters had long been calling her, and she soon had several attractive options. Ultimately, Dana became the new chief oper- ating officer (COO) of White Goods, Inc., a struggling maker of high-end kitchen appliances. Several years of flat sales at White Goods prior to Dana’s ar- rival had precipitated the departure of her predecessor. Nimbler and more aggressive competitors had begun to chip away at the firm’s traditional quality advantage by introducing new materials and production technologies. Even more ominous, how products were sold and distributed was changing. While White Goods con- tinued to rely on a network of independent dealers, its most for- midable competitors had begun to establish long-term ties with large retail stores; some had even begun to manufacture private- label appliances. Dana expected these trends to accelerate. Dana was the first senior executive in fifteen years to be brought in from outside the company. When White Goods’s chief execu- tive officer, Paul Schofield, hired her to get growth back on track, he promised Dana that if she did well, she would succeed him as CEO within a few years. But Dana was convinced that produc- ing moderately priced products for large stores was the way to go, 135 136 BREAKTHROUGH BUSINESS NEGOTIATION and such a move would not be an easy sell. A decision to market through large outlets would anger the dealers and could erode White Goods’s tight control over sales and servicing channels. Moreover, producing lower-priced offerings was at odds with White Goods’s proud tradition of manufacturing premium products. Assuming that Dana is correct about the direction White Goods should go, how should she build support for needed change? Take a few minutes to think about how you would approach this situation. Dana cannot hope to accomplish the changes she desires by relying on the authority vested in her position. She needs to be able to persuade people to go along with her. To be effective, lead- ers like Dana need to master five core coalition-building tasks: Task 1: Mapping the influence landscape—identifying who needs to be persuaded and how to do so Task 2: Shaping perceptions of interests—influencing others’ beliefs about what they want Task 3: Shaping perceptions of alternatives—influencing others’ beliefs about the options open to them Task 4: Gaining acceptance for tough decisions—increasing the likelihood that difficult choices will be accepted Task 5: Persuading at a distance—achieving a broad impact through mass persuasion TASK 1: MAPPING THE INFLUENCE LANDSCAPE Sometimes it is sufficient to convince a single person, but more typically leaders like Dana must build supportive coalitions of in- terest groups to secure support for their initiatives. Often it is also necessary to neutralize opponents and prevent blocking coalitions from forming. Before beginning to design a persuasion strategy, it is essential to map the influence landscape. Dana’s ultimate goal was to build support for her strategy and to prevent opposition from coalescing. Simply dictating change would have bred resistance, undermining her position. It could even have cost her job. Consequently, she set out to identify peo- ple and groups whose support was crucial, as well as potential op- ponents. The CEO, Paul Schofield, would obviously have to be on board. But other top-level executives would influence him, so she wanted to pinpoint who else in the organization she needed to persuade. Identifying Targets of Influence The first step is to identify the groups within which support must be built and opposition neutralized. Such groups typically include: • Organizational units of employees bound together by shared training and expertise or by shared tasks and supervision • Identity groups, bound by occupation, age, gender, race, or social class, that protect shared interests and promote mutual solidarity • Power coalitions of people who have banded together oppor- tunistically to advance or protect shared interests, but who may not otherwise identify with or socialize with each other 1 Dana’s analysis persuaded her that she needed to build support in top management, the sales and distribution division, and the manufacturing workforce. Persuading top management would re- quire that she cultivate and retain the confidence of the CEO, her peers, and top-level subordinates. The changes Dana envisioned would call for shifts in power relationships that could create win- ners and losers among key players who enjoyed longstanding re- lationships with the CEO and with each other. She would also need to deal with likely opposition from White Goods’s sales force and network of independent dealers. Her third task would be to build a base of trust and respect with the workforce to convince them of the need to manufacture less expensive (and less presti- gious) products. BUILDING COALITIONS 137 138 BREAKTHROUGH BUSINESS NEGOTIATION Analyzing Influence Networks The next step is to analyze influence networks—configurations de- termined by who defers to whom on crucial issues. 2 This level of analysis identifies opinion leaders who exert disproportionate in- fluence on decision making. 3 Convincing these pivotal individu- als translates into broad acceptance, and resistance on their part could galvanize broader opposition. Dana’s analysis of influence networks within top management at White Goods convinced her that Todd Simpson, vice president of sales, was pivotal. A career employee strongly invested in the company’s traditions, Todd had risen through the sales ranks to become a trusted adviser to Schofield. Todd’s support for Dana’s proposed change initiatives was crucial. He would be influenced by his direct reports, the regional sales directors, who would in turn come under pressure from White Goods’s independent dealers. But Todd was also respected by both groups and capable of influenc- ing them. Dana concluded that she would also need to win the support of Sarah Wolverton, vice president of manufacturing, and Nathan Simon, vice president of engineering, to move down-market to lower-priced products. Both were influential with the CEO, though less so than Todd, and both deferred to Todd on matters pertain- ing to company culture and traditions. Dana had begun to develop a relationship with Nathan but barely knew Sarah. The resulting influence network is illustrated in the figure on page 139, with the strength of existing relationships represented by the thickness of the connecting arrows. Identifying Supporters, Opponents, and Persuadables Some people will endorse the leader’s agenda right away because it advances their own interests. But enlisting people as supporters doesn’t mean that you can take them for granted. It’s never enough simply to elicit support; you have to maintain it to ensure that sup- port doesn’t slip away in the night. Leaders must devote energy to buttressing and deepening the commitment of their supporters, and to expanding their own persuasive reach by helping allies become more persuasive. In the words of Owen Harries, "Preaching to the converted, far from being a superfluous activity, is vital. Preachers do it every Sunday. The strengthening of the commitment, intel- lectual performance, and morale of those already on your side is an essential task, both in order to bind them more securely to the cause and to make them more effective exponents of it." 4 Meanwhile, other important players will oppose your efforts whatever you do. But identifying people as opponents does not mean that you can ignore them. To analyze your opponents, ask yourself the following questions: How long have efforts to orga- nize opposition been going on? Is the opposition united by long- standing relationships and shared interests or by short-term opportunism? Are there linchpins whose conversion or neutral- ization would substantially weaken resistance? Because persuasion consumes time and emotional energy (which should not be wasted on the irrevocably opposed), it is es- sential to assess early who can be persuaded. If Todd were not persuadable, Dana would be well advised to start elsewhere and aim to bring him on board later. But Dana perceived Todd as a BUILDING COALITIONS 139 Nathan Sarah Todd Paul Dana Influence Diagram thoughtful, forward-looking person; she considered him persuad- able. She was confident that she had a strong case and could sup- port it with logical arguments and sales trend data, but she also knew that Todd might still oppose change. Assessing Targets’ Interests The next step is to zero in on the targets’ interests. What do Todd and the regional sales managers care about? Put yourself in their shoes; your aim is to grasp what they perceive their interests to be, not what you believe they should be. Faced with the change Dana envisioned, Todd and others could resist for a variety of reasons: • Loss of a comfortable status quo. They see no reason to change in ways that might cut their earnings or alter established pat- terns of social interaction. • Challenge to one’s sense of competence. They fear feeling in- competent and unable to perform well in the postchange environment. • Threats to self-defining values. They believe that change will produce a culture that discredits traditional notions of value and rewards behaviors antithetical to their self-image. • Potential loss of security due to uncertainty about the future. They misunderstand or fear the intended consequences of a proposed change. • Negative consequences for key allies. They fear the conse- quences for others they care about or are beholden to. Dana foresaw that Todd might oppose a dramatic shift in dis- tribution strategy out of concern for White Goods’s premium image and the impact on his organization. She knew that Todd would come under strong pressure from others. Many regional sales di- rectors would oppose a change that could undermine their status and affect their compensation. Todd would also hear from dealers 140 BREAKTHROUGH BUSINESS NEGOTIATION who would view a decision to sell through large stores as a threat to their businesses. Clearly, she faced an uphill battle to gain Todd’s support. Assessing the Driving and Restraining Forces People facing tough decisions experience psychological tension as opposing forces push them in conflicting directions. 5 The source of tension might be internal conflicts (Do I want X more than Y? Should I do what I want to do or what I think I should do?) or social pressures, such as competing prior commitments or worry about what respected people will think. 6 Ultimately, a person de- cides that the benefits of one path outweigh the costs of renounc- ing others. You can deepen your analysis by probing the driving and re- straining forces at work on prospective targets of your influence. Driving forces push people in the direction you desire; restraining forces push them elsewhere. The goal is to strengthen the dri- ving forces or weaken the restraining forces, or both. Dana’s analy- sis of the driving and restraining forces acting on Todd is illustrated in the force-field diagram. The driving forces that would lead Todd to support Dana’s initiative include the logic and data that sup- port her case and, perhaps, reluctance to oppose her openly. Re- straining forces include his desire to protect White Goods’s culture and the pressures exerted on him by sales directors and dealers. On the face of it, the driving forces look like thin reeds arrayed against the powerful restraining forces. Identifying Targets’ Alternatives The next step is to evaluate how key people perceive their alter- natives. For Dana, this means predicting the actions that Todd and other potential opponents might take. Specifically, is resistance to persuasion likely to be overt or covert? Todd could simply with- hold his support or, more subtly, raise questions about the risks of BUILDING COALITIONS 141 Dana’s proposals. He could act alone or in concert with others, such as the regional sales managers. A blocking coalition of Todd and the regional sales managers would seriously threaten Dana’s change agenda. Todd’s influence with Paul, the CEO, is sufficient to stall Dana’s efforts, but not everyone with reason to resist change has the power to do so. Ask yourself: Is the resistance of opposing coalitions likely to be active or passive? What forms might it take? More generally, how do key people perceive their alternatives? How might these perceptions be altered? A clear grasp of the lat- ter will sharpen your influence strategies. TASK 2: SHAPING PERCEPTIONS OF INTERESTS The next step is to try to shape others’ perceptions of their inter- ests—what they care about and the goals they want to achieve. Strategies for transforming perceptions of interests are altering in- centives, framing decisions, drawing on the power of social influ- ence, and engaging in quid pro quo negotiation. 142 BREAKTHROUGH BUSINESS NEGOTIATION Logic and data Reluctance to say "no" openly Concerns about company culture Opposition from the sales force Opposition from the dealers TODD Driving Forces Restraining Forces Balance of Driving and Restraining Forces
Altering Incentives Changing the incentive systems within which people operate— introducing rewards or disincentives or both—can alter their per- ceptions of their interests. To the extent that people pursue the rewards or avoid the disincentives, their behavior (but not neces- sarily attitudes) will change. Measurement systems, compensation plans, budgets, and even mission statements and strategic plans can all function as levers to influence behavior in organizations. By setting expectations and defining rewards and punishments, they push people in desired directions. Such measures can be especially effective in the short term, and they are usually necessary when prompt and significant behavioral change is called for. Dana should think through how compensation might work for the regional sales directors under the new system and how incen- tives could be structured for dealers. A proposal that responds pos- itively to their objections would weaken a potent restraining force. Framing Decisions Framing is the use of argument, analogy, and metaphor to promote a favorable definition of the problem to be solved and the set of potential solutions. Framing has been characterized as "a burn- ing glass which collects and focuses the diffuse warmth of popular emotions, concentrating them on a specific issue." 7 Because peo- ple’s interests tend to remain latent and diffuse until they face a choice, and because how people perceive their interests depends on how choices are posed, framing is a powerful tool. Dana ought to frame her proposal in a way that elevates some interests while marginalizing other interests or leaving them dor- mant. She can accomplish this by linking her agenda to people’s needs, wants, and aspirations and linking choices she opposes to their worries and fears. Done well, this approach excites emotions BUILDING COALITIONS 143 that color individuals’ choices. Effective framing uses a number of techniques: • Invoking the common good. This approach emphasizes col- lective benefits and downplays individual costs. Dana could stress the overarching importance to the organization of getting sales growth back on track and attempt to frame the costs to Todd and the regional sales directors as a sacrifice that must be made for the common good. • Linking to core values. Marketers and propagandists long ago learned the efficacy of linking choices to the values that define self- identity. Cigarette companies, for example, link smoking to inde- pendence and the freedom to choose. Dana could endorse Todd’s identification with the company’s tradition of producing high- quality products and emphasize that sales growth would support the investment in new technologies needed to sustain it. • Heightening concerns about loss or risk. Some framing tech- niques exploit biases in the ways that people make decisions. Many people are loss averse—more sensitive to potential losses than to equivalent potential gains. 8 Desired courses of action could thus be cast in terms of gains and undesired choices in terms of losses. Similarly widespread is the tendency to be risk averse—to prefer guaranteed gains to risky choices, even if the latter could yield much larger gains. 9 Here again, desired courses of action can be characterized as less risky, undesired choices as more risky. Dana could dwell on the risks of failing to get sales growth back on track, including vulnerability to takeover and loss of control over the organization’s destiny. • Rejection and retreat. Asking for a lot initially and then set- tling for less shapes the other side’s perceptions of interests. This works because people are loss averse—more sensitive to potential losses than to equivalent potential gains. 10 Dana could propose to sell exclusively through large stores and then "retreat" to a plan to sell only midrange lines through large stores, reserving the pre- 144 BREAKTHROUGH BUSINESS NEGOTIATION mium lines for existing dealers. The risk is that an extreme initial request might trigger resistance and the emergence of a blocking coalition. • Enlarging the pie. Choices perceived as win-lose propositions are particularly difficult to sell. Broadening the range of issues under consideration can facilitate mutually beneficial trades that "enlarge the pie." 11 Alongside her proposal to sell through large stores, Dana might put on the table issues she knows to be im- portant to Todd. Her earlier analyses might have revealed, for ex- ample, that Todd wants to adopt a state-of-the-art sales-tracking system. • Neutralizing toxic issues. As we saw in Chapter Two, progress on multi-issue initiatives can be stalled by the presence of toxic issues. Toxic issues can sometimes be neutralized by postponing them for future consideration or by making up-front commitments that allay anxieties. Dana could demonstrate her commitment to the dealer network by proposing a two-tier distribution system in which mid- to low-range products would be sold in large stores and mid- to high-range products through dealers. • Inoculating against expected challenges. As far back as Aris- totle, persuaders have been advised to inoculate their audiences against the arguments they expect their opponents to make. Re- futing weak forms of expected counterarguments immunizes audi- ences against the same arguments when they are advanced in more potent forms. Dana should prepare responses to the objections she anticipates from the regional sales directors and dealers. She might say to Todd, "I know that your people are likely to be concerned about X, but the issue is really Y." • Providing a script for convincing others. In addition to influ- encing the immediate target, successful framing provides that per- son a persuasive script for convincing others. As she frames her arguments, Dana should keep in mind that Todd will have to sell them to the regional sales directors and dealers; her arguments should explicitly address their concerns. BUILDING COALITIONS 145
Using Social Influence People rarely make important choices independently; most peo- ple are influenced by their networks of relationships and the opin- ions of key advisers. 12 Awareness that a highly respected person already supports an initiative alters others’ assessments of its at- tractiveness, its likelihood of success, and the potential costs of not getting on board. Convincing opinion leaders to lend support and mobilize their own networks thus has a powerful leveraging effect. Likewise, a leader who has built political capital with key people can draw on reciprocity to gain a buy-in. Todd’s assessment of the costs and benefits of supporting or op- posing Dana’s initiative will be strongly influenced by the opin- ions of those in his network of relationships. It is thus important for Dana to understand the full range of pressures that could im- pinge on Todd. Research in social psychology has established that people prefer choices that enable them to: • Remain consistent with strongly held values and beliefs, which tend to be shared with important reference groups. People asked to behave inconsistently with their values or beliefs experience internal psychological dissonance, exter- nal social sanction, or both. • Remain consistent with their commitments, because failure to honor commitments incurs social sanctions. People prefer not to reverse themselves or overtly constrain their future choices by setting undesirable precedents. • Preserve their sense of control. Choices that threaten one’s position in a social hierarchy or sense of control are likely to provoke anxiety. • Repay obligations. Reciprocity is a strong social norm, and people are vulnerable to appeals for support that invoke past favors. • Preserve their reputations. Choices that preserve or enhance one’s reputation are viewed favorably, those that could jeop- ardize one’s reputation negatively. 146 BREAKTHROUGH BUSINESS NEGOTIATION • Gain the approval of respected others, such as opinion lead- ers, mentors, experts, and others to whom people look for clues about "right thinking." 13 All else being equal, Todd will make choices that appear con- sistent with his values and commitments, maintain his status, repay obligations, enhance his reputation, and gain the approval of respected others. He will avoid choices that violate his values, require him to renege on commitments, create undesirable prece- dents, undermine his sense of control, make him appear ungrate- ful, damage his reputation, and offend respected others. These universal preferences translate readily into effective ways to harness the power of social influence: • Leveraging small commitments into larger ones. As we saw in Chapter Three, a person who has been persuaded to make in- nocuous commitments has already started down the slippery slope to larger ones. 14 This approach to persuasion—entanglement— presumes that people can be led from point A to point B in a suc- cession of small, irreversible steps when doing so in a single leap would be impossible. Note too that public commitments carry more weight than private commitments. Commitments made in pri- vate offer wiggle room; you can argue that you were misunderstood or misquoted. Backing away from commitments made in front of others is significantly more difficult. This is why weighty decisions and commitments to specific goals should be made at meetings: people’s reputations are put on the line. This is also why the first- mover advantage in securing early commitments is substantial; once your opponents secure commitments of support, the battle to win away their supporters is uphill. In addition to making a good case, you must also help targets of persuasion find ways to disen- tangle themselves from prior commitments gracefully. • Drawing on the power of reciprocity. The desire to reciprocate is a strong motivating force. 15 Because Todd’s relationship with his regional sales directors involves long-standing expectations of mu- tual support, he will be loath to betray those expectations. Dana BUILDING COALITIONS 147 can begin to counter this stance by cultivating a sense of obliga- tion in Todd, perhaps by helping advance goals that are important to him. The resulting debt is a source of capital on which she can draw when the time comes to push her initiative. Note that favors do not have to be precisely balanced. Studies have shown that small favors can be leveraged into disproportionately large recip- rocal favors. It is valuable to keep this principle in mind when in- fluencing others and when resisting others’ attempts at persuasion. • Using behavior change to drive attitude change. Everyone knows that attitudinal changes can translate into significant be- havioral changes, but the reverse can also be true: changing some- one’s behavior can change the person’s attitudes. 16 People have a strong need for consistency; once persuaded to try something new, they are likely to revise their attitudes accordingly. For example, Dana might ask Todd to participate in a study of ways to make a two-tier distribution system work. Having worked on the study and helped to shape its conclusions, Todd’s attitudes might shift to align with his actions. • Sequencing through relationship networks. Faced with difficult choices, people often look to others they respect for clues about "right thinking." They seek out opinion leaders for their exper- tise or experience or their access to information, or simply because they have authoritative personalities. Whatever the source of their stature, it is important to understand how opinion leaders formu- late their opinions. As we have seen, this is a matter of tracing who defers to whom on key issues. 17 If Todd defers to senior people in other functions on issues of company strategy, it pays off to secure the support of these people first. As we saw in Chapter Three, Dana should draw up a sequencing plan to decide when and in what order to approach people in order to form a coalition and build momen- tum before she gets to Todd. 18 She should also carefully plan the sequence of individual and group meetings. Dana could meet in- dividually with those whom Todd trusts. Having won their support, she could introduce the issue in a group meeting that Todd attends and then follow up with a one-on-one meeting with Todd. 148 BREAKTHROUGH BUSINESS NEGOTIATION
Engaging in Quid Pro Quo Negotiation If crucial people cannot otherwise be brought along, it may be nec- essary to engage them in this-for-that negotiation, agreeing to sup- port initiatives they care about in exchange for their support of yours. Success rests on understanding the full set of interests at stake—which may include reputation and prestige as well as tan- gible needs—and on knowing how to craft a suitable trade. Sup- port can often be bought. But at what cost? Leaders who don’t know when to stop buying support can end up making compromises that dilute their efforts. As illustrated in the accompanying figure, artful use of incen- tives, framing, social influence, and quid pro quo negotiation will strengthen the forces driving Todd in the direction Dana favors and weaken restraining forces. With careful thought and sustained effort, Dana may be able to tip the scales and get Todd to support her initiative. BUILDING COALITIONS 149 Reluctance to say "no" openly Support of CEO and others Reciprocity on other issues Logic and data "Good of company" framing Concerns about company culture Less opposition from the sales force Less opposition from the dealers TODD Driving Forces Restraining Forces New Balance of Driving and Restraining Forces
TASK 3: SHAPING PERCEPTIONS OF ALTERNATIVES Shaping people’s perceptions of their own interests is by no means the only avenue for persuasion. You can also influence their per- ceptions of their alternatives, the set of options among which they believe they must choose. This usually entails directing their atten- tion toward alternatives you favor and eliminating less favorable choices from consideration. Introducing New Options People are likely to perceive their alternatives too narrowly: they overlook potentially attractive alternatives or construe them as nonviable, too risky, or undesirable. Often this phenomenon is a consequence of how decisions are framed. Because organizations tend to cast new choices in the same old ways, coalitions are like- ly to form along predictable lines. Often one can exert influence simply by expanding the range of alternatives under consideration. Dana could stimulate inno- vation, for example, by encouraging people at White Goods to benchmark best-in-class organizations, thus exposing them to al- ternative approaches to familiar problems. Ideally, she would sug- gest an organization with a successful two-tier approach to sales. Introducing new options can put stress on existing coalitions, set- ting the stage for the creation of new ones. Setting the Agenda Big decisions draw on tributary processes that define the problem, identify alternatives, and establish criteria for evaluating costs and benefits. By the time the problem and the options have been defined, the actual choice may be a foregone conclusion. This is why it is so important to shape the decision-making agenda early on. "Pay great attention to the agenda of the debate," cautions Owen Harries: 150 BREAKTHROUGH BUSINESS NEGOTIATION He who defines the issues and determines their priority is al- ready well on the way to winning. . . . Diplomats, at least when they are performing effectively, understand this well, which is one reason they often appear fussy and pedantic to outsiders who have not grasped the point at issue. . . . It is just as important, and on the same grounds, to deny your opponent the right to impose his language and concepts on the debate, and to make sure you always use terms that reflect your own values, traditions, and interests. 19 One touchstone to successful persuasion is thus simply to be there during the formative period in order to define the terms of the debate before momentum builds in the wrong direction, or ir- reversible decisions are made, or too much time passes. Another is to help select the information used to define the problem and the options. Dana could commission studies, for example, to ex- plore changes in how kitchen appliances are sold and distributed. Eliminating "Do Nothing" as an Option It is alarmingly easy, even with the best of intentions, to defer or delay a decision. When success requires the coordinated actions of many people, delay by any single individual can have a cascade effect, giving others an excuse not to proceed. A leader must there- fore work to eliminate "do nothing" as a viable option. Dana must decide when the time is ripe and then push for a decision on dis- tribution systems. One approach is to schedule action-forcing events—events that force people to make commitments or take actions. Meetings, re- view sessions, and deadlines can all provide impetus. Those who do make commitments should immediately be locked into timeta- bles that specify incremental implementation milestones. Regular meetings to review progress and tough questioning of those who miss agreed-on goals increase the psychological pressure to follow through. A caveat: avoid pressing for closure until the balance of forces is tipping in the right direction. BUILDING COALITIONS 151 A related tactic is progressive elimination of less desirable op- tions, funneling the decision-making process toward the choice you favor. People are rarely willing to make difficult decisions be- fore they have exhausted less painful options. Sometimes it makes sense to let them try to make these options work, especially if you are reasonably certain that they will fail. If Dana finds Todd strong- ly opposed to her plan, she could suggest that he produce a plan for changing the distribution system and see what he proposes. If his plan isn’t feasible and the CEO rejects it, she will be in a po- sition to say, "Okay, now we try it my way." Pruning of options is often necessary to provide a defensible rationale for a decision, dif- fuse responsibility for unpleasant outcomes, and lead others to the point of readiness to commit. The downside is that valuable time gets consumed. TASK 4: GAINING ACCEPTANCE FOR TOUGH DECISIONS Leaders often have to make unpopular decisions. When someone’s pet project is shut down, spending is curtailed, or someone is de- prived of responsibility, the challenge is to get people to accept the consequences of the imposed decision. Although never easy, tough decisions can be made more palatable by paying careful attention to process. Creating a Fair Process People at White Goods are more likely to accept the consequences of Dana’s decision if it is perceived to be the outcome of a fair pro- cess. 20 When people believe that the decision-making process was legitimate and that their views were taken seriously, they are more likely to support implementation. Leaders who gain reputations for being thoughtful and deliberative enlarge the scope within which people will accept and support their choices. Those known for arbitrariness, thoughtlessness, and apparent disregard for equity 152 BREAKTHROUGH BUSINESS NEGOTIATION fuel resistance and furnish focal points around which opposition can mobilize. Engaging in Shared Diagnosis Involving people in the diagnosis of organizational problems is a form of entanglement: participation in the diagnosis makes it more difficult to deny the need for tough decisions. By the end of such a process, people are often willing to accept outcomes they would never have accepted at the outset. This is another reason for Dana to engage Todd in an analysis of changes in how appliances are dis- tributed. Consulting Before Deciding Consultation promotes buy-in. Dana should consider consulting throughout White Goods about the emerging challenge from com- petitors and the role of large retail stores in the market. The knowl- edge gained could promote acceptance of the eventual decision and deepen her grasp of the state of play in the organization. Good consultation means active listening. 21 Posing questions and encouraging people to voice their worries, then summarizing what you have heard, signals that you are paying serious attention. The power of active listening as a persuasive technique is vastly un- derrated. By channeling people’s thinking and framing choices, active listening can promote acceptance of difficult decisions. Be- cause the questions leaders ask and the way they summarize and feed back responses powerfully affect people’s perceptions, active listening and framing are a particularly potent persuasive pairing. Giving What Is Asked For It is disconcerting to be asked what you would need in order to ac- complish something difficult and then to be given it. Having made a difficult decision, the leader asks those responsible for imple- mentation what resources they will need. After carefully probing BUILDING COALITIONS 153 their assessments, the leader then says, "You have it! Let’s get go- ing." This tactic is a variation on persuading people to make a commitment and then holding them to it. TASK 5: PERSUADING AT A DISTANCE Finally, leaders can’t possibly communicate individually with every- one they need to persuade, so they must be proficient at persuad- ing from a distance—communicating themes and priorities in speeches, memos, and other forms of one-to-many communica- tion. In addition to persuading top management and the sales organization, Dana also has to win the support of the larger work- force; they are justifiably proud of the high-quality products they produce and may resent a decision to move down-market. Constructing Reliable Communication Channels Just as nature abhors a vacuum, informal networks spring up to fill communication voids in organizations. In the absence of re- liable formal communication, people rely on the grapevine for information. The problem, of course, is that the grapevine intro- duces distortion into the communication process. Some of this distortion is unintentional, a product of error and omission in person-to-person transmission. But those seeking to advance par- tisan goals can intentionally distort information. As Garth Jowett and Victoria O’Donnell put it, propaganda functions by "with- holding information, releasing information at pre-determined times, releasing information in juxtaposition with other infor- mation that may influence perceptions, manufacturing informa- tion, communicating information to selective audiences, and distorting information." 22 Whatever their intentions, the people at focal points in these informal communication networks have substantial power to shape messages. Thus, leaders like Dana must preempt the grape- vine by building reliable formal communication channels. Whether 154 BREAKTHROUGH BUSINESS NEGOTIATION this means publishing a new newsletter or writing memos to the workforce or convening town meetings, the goal is direct access to the target audience. Good communication channels transmit the right information in a timely and responsive way. It is easy to fall behind the com- munication curve, especially when the decision in question has negative consequences. It may seem easier to withhold bad news, particularly if the full picture is not yet available. But doing so sets up a vicious circle in which official statements come out in bits and pieces, reactively, and never catch up with the grapevine. It is wise to assume that bad news will leak out quickly; plan to be there first so you can shape the message and avoid triggering re- sistance unnecessarily. Focus and Repetition Leaders who try to communicate too many messages at once often end up with a muddle. One of the core insights of research on per- suasive communication is the power of focus and repetition. 23 Dana’s persuasive messages are most likely to take root in the minds of White Goods’s workforce if they consist of a few core themes, repeated until they sink in. It is a sure sign of success when people begin to echo your themes without knowing they are doing so, and focus and repetition are effective means to this end. By the third or fourth time we hear a new song on the radio, for instance, we often cannot get it out of our minds. Of course, we may also grow irritated by repetition: using precisely the same words over and over is likely to annoy and insult your listeners and will make it apparent that you are trying to persuade, which can provoke backlash. The art of effective communication is to repeat and elaborate core themes without sounding like a parrot. Dana had to craft the message that a move down-market need not compromise quality. In early tours of White Goods plants, Dana had learned that the workforce was proud of its products but ashamed that the company sold only to wealthy customers. Dana BUILDING COALITIONS 155 could tap into this sentiment by subtly emphasizing that the new products would be affordable for workers and their families. Matching the Medium to the Message Decisions about how to communicate a message shouldn’t be made lightly. Leaders have at their disposal a variety of forums and me- dia, including speeches, small-group meetings, town meetings, newsletters, memos, interactive videoconferences, videotapes, and Web pages. News is nearly always best delivered in an interactive forum, such as a meeting at which people can ask questions, but complex technical and data-intensive arguments are best conveyed in written form. 24 Speeches and live videoconference and town meeting presentations are ideal for communicating broad goals, values, and inspiration. Prerecorded video presentations, though useful for disseminating information about the progress of initi- atives, can seem contrived when used to communicate a new vi- sion. In developing her communication plan, Dana should take into account how White Goods employees feel (or could feel) most comfortable interacting with top leadership. Do senior man- agers meet regularly with employees in town hall formats? Are such meetings viewed as open and risk-free opportunities to ask questions or as one-way streets for management to tell employ- ees how it’s going to be? If the latter, Dana could send a message by running a more open process. Building Personal Credibility Personal credibility is an important persuasive resource. Numer- ous studies have found the persuasiveness of a message to be strongly linked to the perceived credibility of its source. 25 This is not a new observation; as Aristotle pointed out in Rhetoric: Of the modes of persuasion furnished by the spoken word there are three kinds. The first kind depends on the personal 156 BREAKTHROUGH BUSINESS NEGOTIATIONcharacter of the speaker; the second on putting the audience in a certain frame of mind; the third on the proof, or appar- ent proof, provided by the speech itself. Persuasion is achieved by the speaker’s personal character when the speech is so spoken as to make us think him credible. We believe good men more fully and readily than others; this is true gen- erally whatever the question is, and absolutely true where exact certainty is impossible and opinions are divided. 26 Just so. Leaders with a reputation for integrity are listened to because they are respected, considered trustworthy, and perceived to possess the experience to make good judgments. They are also more persuasive when their approval is highly valued. Leaders who demand and reward excellence, and who spotlight and condemn inadequate performance, are likely to find their approval a rare and sought-after commodity. A leader who takes this too far might earn a reputation for never being satisfied, but a reputation for not being tough enough is probably more damaging. OUTCOME FOR DANA In the end, Dana successfully transformed White Goods. She em- ployed shared diagnosis to convince top management, including a reluctant Todd, of the need for change. This initiative led to the selection of a project team to plan changes in the product devel- opment process and, in turn, to two pilot projects for midrange offerings. As these projects began to bear fruit, but substantially before they were ready for launch, Dana began communicating ex- tensively with the company as a whole about the need to move in the direction of midrange appliances. She made the case for change in a series of in-person meetings and written communications, and emphasized that the proposed new offerings would bring the com- pany’s products within the reach of everyone. She also highlighted the likely downside of not moving in this direction: progressive erosion of the company’s competitiveness. BUILDING COALITIONS 157 The final piece involved placating salespeople and the net- work of independent dealers. Working closely with Todd, Dana met directly with groups of salespeople and dealers to explain the decision to sell midrange products directly through large retail stores under a different brand name. Though upset, they were re- lieved to be reassured that the company was committed to retain- ing the dealer network for higher end products. HONING YOUR DEFENSES Efforts to persuade are a pervasive part of life. Negotiators and lead- ers don’t merely need to know how to persuade; they must also know when to permit themselves to be persuaded and when to re- sist. The former calls for understanding your own biases and blind spots and how they might impede openness to good arguments. The latter calls for understanding others’ persuasive techniques and honing your defenses. All the approaches to persuasion that we have surveyed are as likely to be used on leaders as by leaders. People will strive to frame arguments, employ entanglement, and exploit the power of reci- procity; they will seek to alter perceptions of alternatives and ar- tificially constrain choices. Recognizing these strategies is the most potent defense: forewarned is forearmed. The next best defenses are to broaden options and defer commitment. Slowing down the pace of events and thinking things through are bulwarks against making decisions you will come to regret. Techniques of persuasion are inherently neither benign nor malign. Like many other tools, they can be used for good or ill, and without them leaders would be unable to lead. 158 BREAKTHROUGH BUSINESS NEGOTIATION
Altering Incentives Changing the incentive systems within which people operate— introducing rewards or disincentives or both—can alter their per- ceptions of their interests. To the extent that people pursue the rewards or avoid the disincentives, their behavior (but not neces- sarily attitudes) will change. Measurement systems, compensation plans, budgets, and even mission statements and strategic plans can all function as levers to influence behavior in organizations. By setting expectations and defining rewards and punishments, they push people in desired directions. Such measures can be especially effective in the short term, and they are usually necessary when prompt and significant behavioral change is called for. Dana should think through how compensation might work for the regional sales directors under the new system and how incen- tives could be structured for dealers. A proposal that responds pos- itively to their objections would weaken a potent restraining force. Framing Decisions Framing is the use of argument, analogy, and metaphor to promote a favorable definition of the problem to be solved and the set of potential solutions. Framing has been characterized as "a burn- ing glass which collects and focuses the diffuse warmth of popular emotions, concentrating them on a specific issue." 7 Because peo- ple’s interests tend to remain latent and diffuse until they face a choice, and because how people perceive their interests depends on how choices are posed, framing is a powerful tool. Dana ought to frame her proposal in a way that elevates some interests while marginalizing other interests or leaving them dor- mant. She can accomplish this by linking her agenda to people’s needs, wants, and aspirations and linking choices she opposes to their worries and fears. Done well, this approach excites emotions BUILDING COALITIONS 143 that color individuals’ choices. Effective framing uses a number of techniques: • Invoking the common good. This approach emphasizes col- lective benefits and downplays individual costs. Dana could stress the overarching importance to the organization of getting sales growth back on track and attempt to frame the costs to Todd and the regional sales directors as a sacrifice that must be made for the common good. • Linking to core values. Marketers and propagandists long ago learned the efficacy of linking choices to the values that define self- identity. Cigarette companies, for example, link smoking to inde- pendence and the freedom to choose. Dana could endorse Todd’s identification with the company’s tradition of producing high- quality products and emphasize that sales growth would support the investment in new technologies needed to sustain it. • Heightening concerns about loss or risk. Some framing tech- niques exploit biases in the ways that people make decisions. Many people are loss averse—more sensitive to potential losses than to equivalent potential gains. 8 Desired courses of action could thus be cast in terms of gains and undesired choices in terms of losses. Similarly widespread is the tendency to be risk averse—to prefer guaranteed gains to risky choices, even if the latter could yield much larger gains. 9 Here again, desired courses of action can be characterized as less risky, undesired choices as more risky. Dana could dwell on the risks of failing to get sales growth back on track, including vulnerability to takeover and loss of control over the organization’s destiny. • Rejection and retreat. Asking for a lot initially and then set- tling for less shapes the other side’s perceptions of interests. This works because people are loss averse—more sensitive to potential losses than to equivalent potential gains. 10 Dana could propose to sell exclusively through large stores and then "retreat" to a plan to sell only midrange lines through large stores, reserving the pre- 144 BREAKTHROUGH BUSINESS NEGOTIATION mium lines for existing dealers. The risk is that an extreme initial request might trigger resistance and the emergence of a blocking coalition. • Enlarging the pie. Choices perceived as win-lose propositions are particularly difficult to sell. Broadening the range of issues under consideration can facilitate mutually beneficial trades that "enlarge the pie." 11 Alongside her proposal to sell through large stores, Dana might put on the table issues she knows to be im- portant to Todd. Her earlier analyses might have revealed, for ex- ample, that Todd wants to adopt a state-of-the-art sales-tracking system. • Neutralizing toxic issues. As we saw in Chapter Two, progress on multi-issue initiatives can be stalled by the presence of toxic issues. Toxic issues can sometimes be neutralized by postponing them for future consideration or by making up-front commitments that allay anxieties. Dana could demonstrate her commitment to the dealer network by proposing a two-tier distribution system in which mid- to low-range products would be sold in large stores and mid- to high-range products through dealers. • Inoculating against expected challenges. As far back as Aris- totle, persuaders have been advised to inoculate their audiences against the arguments they expect their opponents to make. Re- futing weak forms of expected counterarguments immunizes audi- ences against the same arguments when they are advanced in more potent forms. Dana should prepare responses to the objections she anticipates from the regional sales directors and dealers. She might say to Todd, "I know that your people are likely to be concerned about X, but the issue is really Y." • Providing a script for convincing others. In addition to influ- encing the immediate target, successful framing provides that per- son a persuasive script for convincing others. As she frames her arguments, Dana should keep in mind that Todd will have to sell them to the regional sales directors and dealers; her arguments should explicitly address their concerns. BUILDING COALITIONS 145
Using Social Influence People rarely make important choices independently; most peo- ple are influenced by their networks of relationships and the opin- ions of key advisers. 12 Awareness that a highly respected person already supports an initiative alters others’ assessments of its at- tractiveness, its likelihood of success, and the potential costs of not getting on board. Convincing opinion leaders to lend support and mobilize their own networks thus has a powerful leveraging effect. Likewise, a leader who has built political capital with key people can draw on reciprocity to gain a buy-in. Todd’s assessment of the costs and benefits of supporting or op- posing Dana’s initiative will be strongly influenced by the opin- ions of those in his network of relationships. It is thus important for Dana to understand the full range of pressures that could im- pinge on Todd. Research in social psychology has established that people prefer choices that enable them to: • Remain consistent with strongly held values and beliefs, which tend to be shared with important reference groups. People asked to behave inconsistently with their values or beliefs experience internal psychological dissonance, exter- nal social sanction, or both. • Remain consistent with their commitments, because failure to honor commitments incurs social sanctions. People prefer not to reverse themselves or overtly constrain their future choices by setting undesirable precedents. • Preserve their sense of control. Choices that threaten one’s position in a social hierarchy or sense of control are likely to provoke anxiety. • Repay obligations. Reciprocity is a strong social norm, and people are vulnerable to appeals for support that invoke past favors. • Preserve their reputations. Choices that preserve or enhance one’s reputation are viewed favorably, those that could jeop- ardize one’s reputation negatively. 146 BREAKTHROUGH BUSINESS NEGOTIATION • Gain the approval of respected others, such as opinion lead- ers, mentors, experts, and others to whom people look for clues about "right thinking." 13 All else being equal, Todd will make choices that appear con- sistent with his values and commitments, maintain his status, repay obligations, enhance his reputation, and gain the approval of respected others. He will avoid choices that violate his values, require him to renege on commitments, create undesirable prece- dents, undermine his sense of control, make him appear ungrate- ful, damage his reputation, and offend respected others. These universal preferences translate readily into effective ways to harness the power of social influence: • Leveraging small commitments into larger ones. As we saw in Chapter Three, a person who has been persuaded to make in- nocuous commitments has already started down the slippery slope to larger ones. 14 This approach to persuasion—entanglement— presumes that people can be led from point A to point B in a suc- cession of small, irreversible steps when doing so in a single leap would be impossible. Note too that public commitments carry more weight than private commitments. Commitments made in pri- vate offer wiggle room; you can argue that you were misunderstood or misquoted. Backing away from commitments made in front of others is significantly more difficult. This is why weighty decisions and commitments to specific goals should be made at meetings: people’s reputations are put on the line. This is also why the first- mover advantage in securing early commitments is substantial; once your opponents secure commitments of support, the battle to win away their supporters is uphill. In addition to making a good case, you must also help targets of persuasion find ways to disen- tangle themselves from prior commitments gracefully. • Drawing on the power of reciprocity. The desire to reciprocate is a strong motivating force. 15 Because Todd’s relationship with his regional sales directors involves long-standing expectations of mu- tual support, he will be loath to betray those expectations. Dana BUILDING COALITIONS 147 can begin to counter this stance by cultivating a sense of obliga- tion in Todd, perhaps by helping advance goals that are important to him. The resulting debt is a source of capital on which she can draw when the time comes to push her initiative. Note that favors do not have to be precisely balanced. Studies have shown that small favors can be leveraged into disproportionately large recip- rocal favors. It is valuable to keep this principle in mind when in- fluencing others and when resisting others’ attempts at persuasion. • Using behavior change to drive attitude change. Everyone knows that attitudinal changes can translate into significant be- havioral changes, but the reverse can also be true: changing some- one’s behavior can change the person’s attitudes. 16 People have a strong need for consistency; once persuaded to try something new, they are likely to revise their attitudes accordingly. For example, Dana might ask Todd to participate in a study of ways to make a two-tier distribution system work. Having worked on the study and helped to shape its conclusions, Todd’s attitudes might shift to align with his actions. • Sequencing through relationship networks. Faced with difficult choices, people often look to others they respect for clues about "right thinking." They seek out opinion leaders for their exper- tise or experience or their access to information, or simply because they have authoritative personalities. Whatever the source of their stature, it is important to understand how opinion leaders formu- late their opinions. As we have seen, this is a matter of tracing who defers to whom on key issues. 17 If Todd defers to senior people in other functions on issues of company strategy, it pays off to secure the support of these people first. As we saw in Chapter Three, Dana should draw up a sequencing plan to decide when and in what order to approach people in order to form a coalition and build momen- tum before she gets to Todd. 18 She should also carefully plan the sequence of individual and group meetings. Dana could meet in- dividually with those whom Todd trusts. Having won their support, she could introduce the issue in a group meeting that Todd attends and then follow up with a one-on-one meeting with Todd. 148 BREAKTHROUGH BUSINESS NEGOTIATION
Engaging in Quid Pro Quo Negotiation If crucial people cannot otherwise be brought along, it may be nec- essary to engage them in this-for-that negotiation, agreeing to sup- port initiatives they care about in exchange for their support of yours. Success rests on understanding the full set of interests at stake—which may include reputation and prestige as well as tan- gible needs—and on knowing how to craft a suitable trade. Sup- port can often be bought. But at what cost? Leaders who don’t know when to stop buying support can end up making compromises that dilute their efforts. As illustrated in the accompanying figure, artful use of incen- tives, framing, social influence, and quid pro quo negotiation will strengthen the forces driving Todd in the direction Dana favors and weaken restraining forces. With careful thought and sustained effort, Dana may be able to tip the scales and get Todd to support her initiative. BUILDING COALITIONS 149 Reluctance to say "no" openly Support of CEO and others Reciprocity on other issues Logic and data "Good of company" framing Concerns about company culture Less opposition from the sales force Less opposition from the dealers TODD Driving Forces Restraining Forces New Balance of Driving and Restraining Forces
TASK 3: SHAPING PERCEPTIONS OF ALTERNATIVES Shaping people’s perceptions of their own interests is by no means the only avenue for persuasion. You can also influence their per- ceptions of their alternatives, the set of options among which they believe they must choose. This usually entails directing their atten- tion toward alternatives you favor and eliminating less favorable choices from consideration. Introducing New Options People are likely to perceive their alternatives too narrowly: they overlook potentially attractive alternatives or construe them as nonviable, too risky, or undesirable. Often this phenomenon is a consequence of how decisions are framed. Because organizations tend to cast new choices in the same old ways, coalitions are like- ly to form along predictable lines. Often one can exert influence simply by expanding the range of alternatives under consideration. Dana could stimulate inno- vation, for example, by encouraging people at White Goods to benchmark best-in-class organizations, thus exposing them to al- ternative approaches to familiar problems. Ideally, she would sug- gest an organization with a successful two-tier approach to sales. Introducing new options can put stress on existing coalitions, set- ting the stage for the creation of new ones. Setting the Agenda Big decisions draw on tributary processes that define the problem, identify alternatives, and establish criteria for evaluating costs and benefits. By the time the problem and the options have been defined, the actual choice may be a foregone conclusion. This is why it is so important to shape the decision-making agenda early on. "Pay great attention to the agenda of the debate," cautions Owen Harries: 150 BREAKTHROUGH BUSINESS NEGOTIATION He who defines the issues and determines their priority is al- ready well on the way to winning. . . . Diplomats, at least when they are performing effectively, understand this well, which is one reason they often appear fussy and pedantic to outsiders who have not grasped the point at issue. . . . It is just as important, and on the same grounds, to deny your opponent the right to impose his language and concepts on the debate, and to make sure you always use terms that reflect your own values, traditions, and interests. 19 One touchstone to successful persuasion is thus simply to be there during the formative period in order to define the terms of the debate before momentum builds in the wrong direction, or ir- reversible decisions are made, or too much time passes. Another is to help select the information used to define the problem and the options. Dana could commission studies, for example, to ex- plore changes in how kitchen appliances are sold and distributed. Eliminating "Do Nothing" as an Option It is alarmingly easy, even with the best of intentions, to defer or delay a decision. When success requires the coordinated actions of many people, delay by any single individual can have a cascade effect, giving others an excuse not to proceed. A leader must there- fore work to eliminate "do nothing" as a viable option. Dana must decide when the time is ripe and then push for a decision on dis- tribution systems. One approach is to schedule action-forcing events—events that force people to make commitments or take actions. Meetings, re- view sessions, and deadlines can all provide impetus. Those who do make commitments should immediately be locked into timeta- bles that specify incremental implementation milestones. Regular meetings to review progress and tough questioning of those who miss agreed-on goals increase the psychological pressure to follow through. A caveat: avoid pressing for closure until the balance of forces is tipping in the right direction. BUILDING COALITIONS 151 A related tactic is progressive elimination of less desirable op- tions, funneling the decision-making process toward the choice you favor. People are rarely willing to make difficult decisions be- fore they have exhausted less painful options. Sometimes it makes sense to let them try to make these options work, especially if you are reasonably certain that they will fail. If Dana finds Todd strong- ly opposed to her plan, she could suggest that he produce a plan for changing the distribution system and see what he proposes. If his plan isn’t feasible and the CEO rejects it, she will be in a po- sition to say, "Okay, now we try it my way." Pruning of options is often necessary to provide a defensible rationale for a decision, dif- fuse responsibility for unpleasant outcomes, and lead others to the point of readiness to commit. The downside is that valuable time gets consumed. TASK 4: GAINING ACCEPTANCE FOR TOUGH DECISIONS Leaders often have to make unpopular decisions. When someone’s pet project is shut down, spending is curtailed, or someone is de- prived of responsibility, the challenge is to get people to accept the consequences of the imposed decision. Although never easy, tough decisions can be made more palatable by paying careful attention to process. Creating a Fair Process People at White Goods are more likely to accept the consequences of Dana’s decision if it is perceived to be the outcome of a fair pro- cess. 20 When people believe that the decision-making process was legitimate and that their views were taken seriously, they are more likely to support implementation. Leaders who gain reputations for being thoughtful and deliberative enlarge the scope within which people will accept and support their choices. Those known for arbitrariness, thoughtlessness, and apparent disregard for equity 152 BREAKTHROUGH BUSINESS NEGOTIATION fuel resistance and furnish focal points around which opposition can mobilize. Engaging in Shared Diagnosis Involving people in the diagnosis of organizational problems is a form of entanglement: participation in the diagnosis makes it more difficult to deny the need for tough decisions. By the end of such a process, people are often willing to accept outcomes they would never have accepted at the outset. This is another reason for Dana to engage Todd in an analysis of changes in how appliances are dis- tributed. Consulting Before Deciding Consultation promotes buy-in. Dana should consider consulting throughout White Goods about the emerging challenge from com- petitors and the role of large retail stores in the market. The knowl- edge gained could promote acceptance of the eventual decision and deepen her grasp of the state of play in the organization. Good consultation means active listening. 21 Posing questions and encouraging people to voice their worries, then summarizing what you have heard, signals that you are paying serious attention. The power of active listening as a persuasive technique is vastly un- derrated. By channeling people’s thinking and framing choices, active listening can promote acceptance of difficult decisions. Be- cause the questions leaders ask and the way they summarize and feed back responses powerfully affect people’s perceptions, active listening and framing are a particularly potent persuasive pairing. Giving What Is Asked For It is disconcerting to be asked what you would need in order to ac- complish something difficult and then to be given it. Having made a difficult decision, the leader asks those responsible for imple- mentation what resources they will need. After carefully probing BUILDING COALITIONS 153 their assessments, the leader then says, "You have it! Let’s get go- ing." This tactic is a variation on persuading people to make a commitment and then holding them to it. TASK 5: PERSUADING AT A DISTANCE Finally, leaders can’t possibly communicate individually with every- one they need to persuade, so they must be proficient at persuad- ing from a distance—communicating themes and priorities in speeches, memos, and other forms of one-to-many communica- tion. In addition to persuading top management and the sales organization, Dana also has to win the support of the larger work- force; they are justifiably proud of the high-quality products they produce and may resent a decision to move down-market. Constructing Reliable Communication Channels Just as nature abhors a vacuum, informal networks spring up to fill communication voids in organizations. In the absence of re- liable formal communication, people rely on the grapevine for information. The problem, of course, is that the grapevine intro- duces distortion into the communication process. Some of this distortion is unintentional, a product of error and omission in person-to-person transmission. But those seeking to advance par- tisan goals can intentionally distort information. As Garth Jowett and Victoria O’Donnell put it, propaganda functions by "with- holding information, releasing information at pre-determined times, releasing information in juxtaposition with other infor- mation that may influence perceptions, manufacturing informa- tion, communicating information to selective audiences, and distorting information." 22 Whatever their intentions, the people at focal points in these informal communication networks have substantial power to shape messages. Thus, leaders like Dana must preempt the grape- vine by building reliable formal communication channels. Whether 154 BREAKTHROUGH BUSINESS NEGOTIATION this means publishing a new newsletter or writing memos to the workforce or convening town meetings, the goal is direct access to the target audience. Good communication channels transmit the right information in a timely and responsive way. It is easy to fall behind the com- munication curve, especially when the decision in question has negative consequences. It may seem easier to withhold bad news, particularly if the full picture is not yet available. But doing so sets up a vicious circle in which official statements come out in bits and pieces, reactively, and never catch up with the grapevine. It is wise to assume that bad news will leak out quickly; plan to be there first so you can shape the message and avoid triggering re- sistance unnecessarily. Focus and Repetition Leaders who try to communicate too many messages at once often end up with a muddle. One of the core insights of research on per- suasive communication is the power of focus and repetition. 23 Dana’s persuasive messages are most likely to take root in the minds of White Goods’s workforce if they consist of a few core themes, repeated until they sink in. It is a sure sign of success when people begin to echo your themes without knowing they are doing so, and focus and repetition are effective means to this end. By the third or fourth time we hear a new song on the radio, for instance, we often cannot get it out of our minds. Of course, we may also grow irritated by repetition: using precisely the same words over and over is likely to annoy and insult your listeners and will make it apparent that you are trying to persuade, which can provoke backlash. The art of effective communication is to repeat and elaborate core themes without sounding like a parrot. Dana had to craft the message that a move down-market need not compromise quality. In early tours of White Goods plants, Dana had learned that the workforce was proud of its products but ashamed that the company sold only to wealthy customers. Dana BUILDING COALITIONS 155 could tap into this sentiment by subtly emphasizing that the new products would be affordable for workers and their families. Matching the Medium to the Message Decisions about how to communicate a message shouldn’t be made lightly. Leaders have at their disposal a variety of forums and me- dia, including speeches, small-group meetings, town meetings, newsletters, memos, interactive videoconferences, videotapes, and Web pages. News is nearly always best delivered in an interactive forum, such as a meeting at which people can ask questions, but complex technical and data-intensive arguments are best conveyed in written form. 24 Speeches and live videoconference and town meeting presentations are ideal for communicating broad goals, values, and inspiration. Prerecorded video presentations, though useful for disseminating information about the progress of initi- atives, can seem contrived when used to communicate a new vi- sion. In developing her communication plan, Dana should take into account how White Goods employees feel (or could feel) most comfortable interacting with top leadership. Do senior man- agers meet regularly with employees in town hall formats? Are such meetings viewed as open and risk-free opportunities to ask questions or as one-way streets for management to tell employ- ees how it’s going to be? If the latter, Dana could send a message by running a more open process. Building Personal Credibility Personal credibility is an important persuasive resource. Numer- ous studies have found the persuasiveness of a message to be strongly linked to the perceived credibility of its source. 25 This is not a new observation; as Aristotle pointed out in Rhetoric: Of the modes of persuasion furnished by the spoken word there are three kinds. The first kind depends on the personal 156 BREAKTHROUGH BUSINESS NEGOTIATIONcharacter of the speaker; the second on putting the audience in a certain frame of mind; the third on the proof, or appar- ent proof, provided by the speech itself. Persuasion is achieved by the speaker’s personal character when the speech is so spoken as to make us think him credible. We believe good men more fully and readily than others; this is true gen- erally whatever the question is, and absolutely true where exact certainty is impossible and opinions are divided. 26 Just so. Leaders with a reputation for integrity are listened to because they are respected, considered trustworthy, and perceived to possess the experience to make good judgments. They are also more persuasive when their approval is highly valued. Leaders who demand and reward excellence, and who spotlight and condemn inadequate performance, are likely to find their approval a rare and sought-after commodity. A leader who takes this too far might earn a reputation for never being satisfied, but a reputation for not being tough enough is probably more damaging. OUTCOME FOR DANA In the end, Dana successfully transformed White Goods. She em- ployed shared diagnosis to convince top management, including a reluctant Todd, of the need for change. This initiative led to the selection of a project team to plan changes in the product devel- opment process and, in turn, to two pilot projects for midrange offerings. As these projects began to bear fruit, but substantially before they were ready for launch, Dana began communicating ex- tensively with the company as a whole about the need to move in the direction of midrange appliances. She made the case for change in a series of in-person meetings and written communications, and emphasized that the proposed new offerings would bring the com- pany’s products within the reach of everyone. She also highlighted the likely downside of not moving in this direction: progressive erosion of the company’s competitiveness. BUILDING COALITIONS 157 The final piece involved placating salespeople and the net- work of independent dealers. Working closely with Todd, Dana met directly with groups of salespeople and dealers to explain the decision to sell midrange products directly through large retail stores under a different brand name. Though upset, they were re- lieved to be reassured that the company was committed to retain- ing the dealer network for higher end products. HONING YOUR DEFENSES Efforts to persuade are a pervasive part of life. Negotiators and lead- ers don’t merely need to know how to persuade; they must also know when to permit themselves to be persuaded and when to re- sist. The former calls for understanding your own biases and blind spots and how they might impede openness to good arguments. The latter calls for understanding others’ persuasive techniques and honing your defenses. All the approaches to persuasion that we have surveyed are as likely to be used on leaders as by leaders. People will strive to frame arguments, employ entanglement, and exploit the power of reci- procity; they will seek to alter perceptions of alternatives and ar- tificially constrain choices. Recognizing these strategies is the most potent defense: forewarned is forearmed. The next best defenses are to broaden options and defer commitment. Slowing down the pace of events and thinking things through are bulwarks against making decisions you will come to regret. Techniques of persuasion are inherently neither benign nor malign. Like many other tools, they can be used for good or ill, and without them leaders would be unable to lead. 158 BREAKTHROUGH BUSINESS NEGOTIATION
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