NEGOTIATION BEST PRACTICES TO ACHIEVE BETTER AGREEMENTS: WIN-WIN SOLUTIONS

By

Jon Levin Fasken Martineau DuMoulin LLP

42nd floor Toronto Dominion Bank Tower Toronto Dominion Centre Toronto, Ontario M5K 1N6
416 865 4401 jlevin@tor.fasken.com

The Three Methods to Forestall the Enemy

Negotiation for a lawyer needs to reflect a clients style and instructions. Assuming a soft negotiation methodology of simply conceding on every contested point is not an option, a classic text of strategy, A Book of Five Rings, by Miyamoto Musashi, written in 1645 offers the following techniques: The first is to forestall him by attacking. This is called Ken No Sen [to set him up]. Another method is to forestall him if he attacks. This is called Tai No Sen [to wait for the initiative]. The other method is when you and the enemy attack together. This is called Tai Tai No Sen [to accompany him and forestall him]. There are no other methods of taking the lead other than these three.1

Whichever method you choose, remember Sir Isaac Newtons Third Law of Physics: For every action there must be an equal and opposite reaction. Methods 1 and 2 are the methods of the hard negotiator a contest of wills. They may lead to bitter feelings, extreme positions, personal conflict, dissatisfaction, ultimatums and often the breakdown of negotiations. They are based on the win-lose style of negotiating: Because you can win quickly by taking the lead, it is one of the most important things in strategy. There are several things involved in taking the lead. You musty make the best of the situation, see through the enemys spirit so that you can grasp his strategy and defeat him.2

Method 3 can be viewed as neither hard nor soft. Rather, it simply equates to negotiating on a principled basis on the merits.

What is the purpose of negotiation?

Any method of negotiation may be fairly judged by three criteria: It should produce a wise agreement if agreement is possible. It should be
1

Miyamoto Musashi, A Book of Five Rings, The Fire Book (Woodstock, The Overlook Press, 1982), translated by Victor Harris, at 71. 2 Ibid

2 efficient. And it should improve or at least not damage the relationship between the parties. (A wise agreement can be defined as one that meets the legitimate interests of each side to the extent possible, resolves conflicting interests fairly, is durable, and takes community interests into account.)3

Okay but the other side is taking outrageous, one sided positions. Well never get a Wise Agreement.
Experience suggests that arguing over positions or taking hard positions usually produces unsatisfactory results. Each side tries through sheer will power or bargaining strength to impose its view. The more extreme a partys opening position is the more time and effort it will take to see if there can be a meeting of the minds.

Possible responses include: Ill be nice and give in as much as I can so we only argue over what is really important.

However, that rewards deviant behaviour. The other side will keep expecting more and more concessions. Good Luck!

Ill be as tough as they are. In fact, Ill be tougher.

We are back to Sir Isaac Newton. The other side has also studied physics. Good Luck!

How Should I Negotiate?

Experience suggests that the following techniques are key to a Wise Agreement: Avoid letting personality get in the way. Focus on substantive interests or the merits and avoid being caught up in nonsubstantive positions. As Miyamoto Musashi said: In strategy it is important to see different things as if they were close and to take a distanced view of close things. It is important
3

Roger Fisher and William Fry, Getting to Yes (2nd ed.) (New York, Penguin Books) 4

3 in strategy to know the enemys sword and not to be distracted by insignificant movements of his sword. You must study this.4 Consider the various possibilities before deciding what to do. Seek to rely on objective, third party information wherever possible.

Who me? I have a personality? It is getting in the way?

Emotions and egos, i.e. people problems, must not be ignored or minimized. Are you attacking the problem or each other?

What is really important here?

Each side must articulate what is really of importance to it. Are the negotiators articulating (i) a position or (ii) their object and underlying interest, in undertaking the negotiation?

Are there a number of possible good results for me?

Prepare, prepare, prepare. Think about the options to resolve a difficult point before the stress of negotiation inhibits creativity.5 Are there options that will produce mutual gain for both sides?

I wish to be fair and reasonable.

A fair standard, e.g. market value, an expert opinion, custom or precedent may demonstrate what others have found to be fair and reasonable. As Machiavelli said in The Prince, A wise man ought always to follow the paths beaten by great men, and to imitate those who have been supreme, so that if his ability does not equal theirs, at least it will savour of it.6
Op. cit. 54 As Machiavelli said in 1505 in Chapter VII of The Prince , as translated by W.K. Mariott and available at http://www.constitution.org/mac/prince06.htm, he who has not first laid his foundations may be able with great ability to lay them afterwards, but they will be laid with trouble to the architect and danger to the building.
5 4

What is the likelihood of obtaining a Wise Agreement if I am stubborn and insisting on my way or the highway?

People Problems versus Substantive Negotiation Issues

Often there is a failure to recognize people problems early in the negotiation and, when recognized, a failure to be open to acknowledging them and dealing with them in a forthright manner. This has to do with perception, emotion and communication. Separating egos from issues means the negotiators may maintain goodwill between themselves. Regardless of the outcome of the negotiation, it would be nice to part friends. Focus on legitimate merits. Just because they have an opposite point of view does not mean their view is also not legitimate. Make sure perceptions are accurate. Theirs and yours. Communicate clearly and do not send mixed messages. Did they really understand your jargon, tax position, corporate policy issue, etc.? Listen accurately and make sure that your points are understood, not misunderstood. Keep emotions to the minimum at the negotiation table. If emotions are running high, find a way to blow off steam away from the negotiation table. Be forward looking and solution oriented. Pointing out problems in response to every suggestion is not helpful. Making suggestions is what it is all about. Remember that negotiation is not about humiliation. It sometimes becomes necessary to allow some face saving, i.e. face saving involves reconciling (i) an agreement on the merits or based on principle with (ii) the self image of the negotiators.

Focus on the Merits, Not on Positions

The basic problem in a negotiation should be the merits of the situation, not conflicting positions that do not speak to the merits.
6

Search for shared and compatible interests. Do other interests really conflict or merely differ?

Chapter VI

Try to put yourself in the shoes of the other side. Ask Why? they are taking a different point of view. Seek to identify what reasons the other side has for not taking your point of view. Does each person on the other side have the same interest? If not, you may have to seek to identify how you can reconcile the other sides competing interests among themselves before you can seek to reconcile the other sides interests with those you are representing. A successful negotiation/Wise Agreement means you will have to be open to the other sides interests and point of view, just as they will have to be open to your interests and point of view.

Develop Options for Mutual Gain

If a Wise Agreement is one that meets the legitimate interests of each side to the extent possible, then one must be prepared to develop options for mutual gain. Negotiation will never be successful as a one way street. If there is not mutual gain, why would the other side ever agree with your proposals? Look to invent solutions to an issue and options that work for each side. Do we really have a pie only of a certain size so that, the more I get, the less you get? Is there an opportunity for mutual gain? Avoid premature judgments as they lead to taking a hard position. Premature judgments may mean you will not listen to real concerns and will foreclose options otherwise available. Avoid searching for a single answer to an issue. Since success in the negotiation depends upon the other side making the decision you want them to make, make it easy for them to do so. Avoid narrowing the opportunities to resolve the situation. Statements such as, Do it my way or we sue constitute an ultimatum. It is hard to retreat from an ultimatum and, because the other side may take you up on it, be sure that is really what you intend. Think of solving a problem as a shared burden and not simply that of the other side. Friends help friends.

Be objective and not partisan. Being seen to be partisan will mean that your views will tend to be dismissed without regard to their merits.

Objective Criteria Trump Subjectivity

Using objective criteria to resolve an issue under negotiation implies that you are relying on principle, not pressure. Most negotiators are open to reason. Most negotiators will not respond favourably to threats. The need is to develop objective criteria and figure out how to use them to advantage. Depending on the negotiation, objective criteria may include: Precedent legal; business; etc. Tradition Reciprocity Third party opinion Professional standards Efficiency Cost Market value Scientific judgment What a court would decide Equality of treatment among different groups Moral standards

If the parties cannot agree on a particular point, perhaps they can agree on a method to reach agreement: Mediation Arbitration of a particular issue within defined parameters Final offer selection A trial of an issue The results of some other negotiation, arbitration or dispute settlement

What is your Best Alternative

For every negotiation it is wise to have thought about your best alternative if the negotiation fails. Knowing your best alternative, you can better define when the negotiation is proceeding satisfactorily and when it is not.

7 The better your best alternative is, the greater your negotiating power is. Consider disclosing your best alternative to the other side. A doomsday weapon is no good if no one knows about it. If the other side knows what your best alternative is, they must factor that into their proposals so that those proposals will be more attractive than the alternative. If the other side is more powerful but will not offer something competitive with your best alternative, your decision process is simplified.

Negotiation Strategies
As much as up front negotiation is desirable and usually the best approach, it takes two to tango. Sometimes, one must be prepared to respond to the other sides tactics by use of your own strategies7: Negotiation cannot be formulaic. Be flexible and adjust your tactics to reflect the tactics on the other side. As Miyamoto Musashi said: You should not have a favourite weapon. To become overly familiar with one weapon is as much a fault as not knowing it sufficiently well. You should not copy others but use weapons which you can handle properly. It is bad for commanders and troopers to have likes and dislikes. These are things you must learn thoroughly.8 Confront the other side when you think they are playing games, e.g. if they attack you personally, point out to them that the attack is personal and will not help the end result. Failure to confront the other side will simply encourage more game playing. If personality problems exist, consider changing the team. This is not about ego. It is about results. If the problem is on the other side of the table, consider confronting the other side with the problem or other strategies such as an end run around the person causing the problem. Consider the good cop/bad cop routine. It may sound trite but it has been known to work.

As Miyamoto Musashi said, op. cit. 53: Strategy is different from other things in that if you mistake the Way even a little you will become bewildered and fall into bad ways. As Machiavelli put it in The Prince, op.cit., Chapter XXV, Nevertheless, not to extinguish our free will, I hold it to be true that Fortune is the arbiter of one-half of our actions, but that she still leaves us to direct the other half, or perhaps a little less. 8 Miyamoto Musashi, op. cit. 48

8 Is the other side afraid of publicity? Note that, once the threat of publicity has been used, the threat dies. Its power lies in threatening it but not using it. Reciprocity can be used or threatened with great effectiveness, e.g. Today, you threatened me and were abusive. Unless I have your word that will never happen again, wait to see what I do to you tomorrow. Misrepresentations will inevitably be discovered and lead to a lack of trust. Embarrassing someone over a misrepresentation can be very effective. There is a distinction between the truth and the whole truth or between the truth and full and plain disclosure. An omission can be a misrepresentation. Does the negotiator have binding authority? You should establish whether he/she does and adjust your tactics accordingly. If there is a lack of trust in the other sides intentions to honour a negotiated agreement, consider negotiating self-policing alternatives if the other side breaches. Inflicting stress on the other side may be a legitimate tactic, e.g. consider whether timing is a factor such that proposing to delay negotiations will pressure one side or the other or such that by offering only limited contract extensions or standstill periods, one side or the other will feel pressure to come to terms. As Miyamoto Musashi said: In strategy, there are various timing considerations. From the outset, you must know the applicable timing and the inapplicable timing, and from among the large and small things and the fast and slow timings find the relevant timing, first seeing the distance timing and the background timing. This is the main thing in strategy. It is especially important to know the background timing, otherwise your strategy will become uncertain.9 Be prepared to threaten, but only if the threat is real. Threats may include a cutoff of credit, supplies of inventory or services, refusing to negotiate, escalating demands, reopening previously settled points, etc. Only take hard positions if you mean them. The other side may take an ultimatum at face value. Never underestimate the power of silence.

Ibid

9 Always be prepared to withdraw from negotiations in the face of unreasonable/unfair negotiating, extreme demands or a refusal to negotiate. It is helpful if the other side understands that you are not afraid to move from the negotiating table to an alternative option. Consider if it is best to ignore something the other side has said. Never underestimate the importance of a deadline. Do not be afraid to leave something on the table. A deal that is too tightly negotiated with virtually nothing left on the table leaves little incentive for the other side to make the deal happen when some unexpected problem emerges.

The best way to enhance ones skill at negotiating is to remember the famous advice of the violinist Jascha Heifitz, upon being hailed by a man on a New York street. The man asks Heifitz, "How do you get to Carnegie Hall?" And Heifitz replied, without breaking stride, "Practice! Practice! Practice!"