Tuesday, September 27, 2011

Transactional Trust

“Five, six, seven…” Verdi was counting as he looked over a list. Tyler Gitou stopped in the hall as he passed Verdi’s office.

“What are you doing, Verdi?” Tyler asked.

“I’m counting my concessions,” Verdi said. “I want to make sure I haven’t given the other party more than he has given me in this negotiation.”

Tyler laughed. “You’re kidding, right?”

Verdi appeared annoyed. “What else am I supposed to do? This guy is a classic positional negotiator. The only way I can get him to move is if I move. But I don’t want to move too much and find out in the end I lost by giving more than I got.”

“And how is your deal coming along? Are you happy with the outcomes from all these moves and concessions?” Tyler asked.

“Gosh, I have no idea. I’ve been so focused on making sure I don’t give too much that I don’t even know what we’re delivering anymore.”

“That’s what I was afraid of, Verdi. The problem with positional negotiators is they get so focused on tactics and ‘winning’ that they don’t realize until the contract is signed what a lousy deal they negotiated. Issues are handled in isolation rather than taking an integrated approach.”

“That’s what’s happened to us,” Verdi said. “He takes an extreme position, I take an extreme position and we focus on how we’re going to get to the middle.”

“Is the middle the answer?” Tyler asked.

“Not necessarily. But he’s a veteran negotiator and he keeps telling me we have to compromise and we’ll both walk away equally dissatisfied. That’s how deals get done.”

“Simply put, Verdi, he’s wrong. He may be a veteran negotiator, but that doesn’t mean he’s a good one. In fact, he sounds like he has no idea what he is doing.”

Verdi looked dejected. “Have you ever dealt with someone like this?”

“Yes,” Tyler said. “Hundreds of times. Dealing with positional negotiators and producing a mutually beneficial outcome is what being a Deal Whisperer is all about.”

Verdi crumpled up his list. “So how does the Deal Whisperer handle this?”

Tyler sat down. “Go back to the basics. What have I told you is the basis for every decision in a negotiation?”

“Trust,” Verdi said. “You told me that people make decisions when they trust they are making the right decision.”

Tyler waved his hand. “No no, I said they make decisions when they trust they are not making the wrong decision.”

“What’s the difference?” Verdi asked.

“All the difference in the world,” Tyler said. “Most business people fear criticism of their decisions more than anything else. Making the wrong decision can end a career. So the process most people follow when making a decision is to look for signs that it won’t be the wrong decision. Even a positional negotiator won’t make a decision until they trust it is not the wrong decision.”

“So how do I build a trusting relationship with a positional negotiator I just met to try and close a good deal.”

“You don’t need a trusting relationship,” Tyler said. “You need transactional trust.”

“Transactional trust? OK, you’re going to have to walk me through this one.”

“I’d be delighted,” Tyler said. “Give me that pad so I can draw you some pictures.”

SEE: "Transactional Trust Part 2."

Monday, September 12, 2011

Negotiation in Crisis, Part 2

“OK,” Verdi said. “I understand. One of the big mistakes around the negotiation our government just had over the national debt was the failure to understand who the parties in the negotiation were.”

“That’s correct,” Tyler Gitou said as he laid his menu on the table. “The very first thing a Deal Whisperer does when working on a deal is map out all of the parties and make sure he or she understands the interests of each of those parties.”

Verdi scowled. “Each of the parties? What do you mean?”

“Let’s go down the list. President Obama: what were his interests?”

Verdi thought for a moment. “I think it was to raise the debt ceiling.”

“That’s not an interest,” Tyler said. “That is an option to meet his interest. Think again.”

“To not cut too much from spending on social programs?”

“Nope. Again, an option to meet his interest. Look at it another way: what was going to happen in the event of no deal? What was President Obama and John Boehner’s BATNA?” Tyler asked.

“Not a very good one,” Verdi said. “Basically a meltdown of the economy!”

“Correct. So it would be fair to say that President Obama’s and John Boehner’s interest was to prevent a financial meltdown. Why?”

“Why? Well, because we’d be in ruin!” Verdi said.

“Maybe. But what would happen to them, as individuals.”

“They’d get thrown out of office in the next election.”

“Exactly,” Tyler said. “Any time you are dealing with politicians you must consider that their primary interest might be self-preservation: what do I need to do to make sure I get elected again? That means producing an outcome that both meets the interest of avoiding a financial meltdown and not damaging their political record for re-election. Each party also has an interest to try and end the negotiation in a way that the other party is hurt to give them an advantage in the next election.”

“Wow,” Verdi said. “There’s a lot going on there! Save the country, save yourself and kill the other guy all at the same time. It’s a shame that all of those interests are treated equally by the parties rather than them getting together and saying, ‘the financial health of the nation trumps any personal interests. Let’s work together as joint problem solvers.’”

“That’s because they are not the only parties to the negotiation.” Tyler said. “President Obama and John Boehner are members of political parties. The members of those parties have interests. The Tea Party has interests. Foreign governments, such as China, which hold a lot of U.S. debt, also have interests. Financial institutions worldwide have interests and finally, the media has an interest: get a good story out of this. All of those parties are influencing the tone and substance of the discussions between Obama and Boehner.”

“So you’re saying it was inevitable that the outcome would end poorly for everyone?”

“Not at all. I’m saying it ended poorly because no one did a strategic analysis of the situation. The Democrats and Republicans viewed it as a fight to have in the media instead of an issue of national interest that required masterful diplomacy and negotiation skills.”

“So what’s the answer, Mr. Deal Whisperer?”

“The same as in any other deal,” Tyler said. “First, establish a shared goal, an outcome, that both parties agree on.”

“Get the Democrats and Republicans to agree on a common goal? That’s asking a lot, isn’t it?”

“No, you can always find an agreed-to outcome at some level. But one party has to have the communication skills and emotional discipline to find that outcome with the other party. Unfortunately, in this negotiation, it was every man for himself. In fact, if not for the deadline and the terrible BATNA if they did not agree, they probably would still be fighting over it today.”