line Jace o Negotiation How to Improvise Agreement in a Chaotic World Michael Wheeler (STRAY eb TAPES Sie Leese ts tier ee oe etThank you for downloading this Simon & Schuster eBook. Join our mailing list and get updates on new releases, deals, bonus content and other great books from Simon & Schuster CLICK HERE To SIGN UP or visit us online to sign up at eBookNews SimonandSchuster.comThe Art of Negotiation How to Improvise Agreement in a Chaotic World Michael Wheeler HARVARD BUSINESS SCHOOL SIMON & SCHUSTER NEWYORK LONDON TORONTO SYDNEY NEW DELIContents Epigraph 1, Embracing Chaos PART ONE: A Sense of Direction 2. A Map of the Pyrenees 3. Prospecting 4. Plan B PART TWO: Improvising 5. Presence of Mind 6. The Swing of Things 7. Situational Awareness PART THREE: Managing the Process 8. Openings 9. Critical Moments 10. Closing PART FOUR: Mastery 11. Silk Purses 12. Wicked Learning 13. Fair Enough Appendix: Twenty-five Reasons to Embrace Chaos in Negotiation—A Strategic Road Map Acknowledgments About Michael Wheeler Notes IndexFor Cally, Edie, and Kate With love and gratitudeFor every complex problem, there is a solution that is simple, neat, and wrong. JOURNALIST AND ESSAYIST H. L. MENCKEN{| 1 ] Embracing Chaos ‘As manager of a private investment firm, Jay Sheldon bought a small cable television company in the Midwest some years ago. He didn’t know much about the industry, but the $8 million price seemed right, and the purchase would let him test the water. Jay and his partners quickly got the business into the black. A year later, they wanted to expand by acquiring nearby systems. After running the numbers, they figured that they could pay $11 million, maybe $12 million tops, to buy a second cable company in a neighboring city. Jay began an extended series of talks with its owner, but after two months of back-and-forth, it became obvious that the parties were far apart on price. “Listen,” the other owner said. “I didn’t post a For Sale sign. You came to me. You'd have to dump fiftcen million in cash right on my desk to tempt me, And I'd probably kick myself if I took it.” Sheldon understood that this wasn’t a bluff, but he also felt the demand was unrealistic. By conventional logic, the parties were deadlocked. If a seller's bottom line is three million Aigher than the buyer's absolute top dollar, you can't have a deal. Or can you? “Let me ask one last question,” Sheldon said before getting up to leave. “If you think your system is worth fifteen million, how about ours?” “Oh, yours is a bit smaller,” was the answer. “I'd say fourteen or so.” Sheldon turned the deal upside down. He adroitly became the seller instead of a buyer. In a little more than a year, he flipped his own system for almost twice what his firm had paid for it (and much of that had been leveraged). He was still bullish on cable, but when he encountered this particular owner, who was rabid about the industry, Sheldon had the agility to transform an apparent impasse into a lucrative sale His solution was clever. More important, though, was his nimble mind-set. In the impediment to his hoped-for acquisition, Sheldon spotted the seed of another deal that would serve him even better. When he let go of his initial plan, the insight arrived in a flash. Sheldon’s agility is the mark of a master negotiator. Yes, preparation is important, but negotiation is a two- way street. We can’t script the process. Whoever sits across the table from us may be just as smart, determined, and fallible as we are. We can’t dictate their agendas, attitudes, or actions any more than we'd let them dominate us. Adaptability is imperative in negotiation from start to finish. Opportunities will pop up. So will obstacles. Power ebbs and flows. Talks that crawl along can race forward or veer off in another direction. Even our own objectives may evolve. We have to make the best of whatever unfolds. Negotiators like Sheldon are great improvisers. When things aren’t going well, they'll float a clever proposal, crack a joke, or even challenge the other side. If need be, they'll also make major changes in strategy. ‘What's odd, though, is that there isn’t much about improvising in standard negotiation books. That's true both for the hardball manuals on dominating the other side and for the “win-win” texts that preach joint problem solving. In spice of their obvious differences, both approaches start with the same static premise that you have your given interests and I have mine. The win-win message is that by laying your cards on the table, you can expand the pie by making mutually beneficial trades. The hardball line tells you to chest your cards (and maybe slip a couple up your sleeve). But there's much more to negotiation than bluffing and trading. The challenge lies in the fact that preferences, options, and relationships are typically in flux. Theorists may have sidestepped this reality, but top negotiators understand this very well.Tye seen this in my own research and also thanks to the work of colleagues at the Program on Negotiation (a cross-disciplinary consortium of negotiation experts at Harvard, Massachusetts Institute of Technology, and Tufts University). In a ten-year project led by Jim Sebenius, we've analyzed the work of great negotiators in a wide range of fields. They've included diplomats such as George Mitchell, who mediated peace in Northern Ireland; investment banker Bruce Wasserstein; and the visionary artists Christo and Jeanne-Claude. ‘The contexts in which these virtuosos negotiated differed. Their personalities ran the gamut as well. Some had a certain gravitas, while others were warm and entertaining—even funny. Yet in our workshops with them, they all emphasized the dynamic nature of negotiation and the importance of agility. The late ambassador Richard Holbrooke, who forged the accord ending the bloodshed in the Balkans, deseribed negotiation as being more like jazz than science. “It’s an improvisation on a theme,” he said. “You know where you want to go, but you don’t know how to get there. It’s not linear.” UN special envoy Lalhdar Brahimi, having mediated in some of the world’s most violent and unpredictable trouble spots, used a nautical metaphor to express the same idea. Negotiators must always “navigate by sight,” he cautioned. No matter how diligently we prepare, we're bound to encounter surprises, pleasant and otherwise, that warrant course corrections. Donald Dell, the sports agent-marketer, made his mark by hammering out huge contracts for basketball players Patrick Ewing and Moses Malone and earning millions in endorsement deals for tennis stars Arthur ‘Ashe and Jimmy Connors. He's orchestrated bidding wars between rival television networks for broadcasting rights to events like the French Open. Dell has also done very well negotiating on his own behalf. In 1998 he sold his sports management firm ProServ to an entertainment company for what he describes as “the proverbial offer I couldn’t refuse.” A few years later, after buying much of it back for twenty cents on the dollar, he then resold his interest to Lagadére Unlimited, where he is group president in charge of TV deals, events, and tennis For all his success, though, Dell is quick to say that things often don’t go according to plan. “I can’t tell you how many times I arrived prepared for a negotiation, only to have someone or something come up that upset or changed the deal I thought I was doing. The only way to protect yourself one hundred percent against this situation is to assume there is something you don't know. This advice will not only keep your mind up to speed with the deal and force you to consider other parties’ motivations, but it will also keep your ego check.” LEARNING, ADAPTING, AND INFLUENCING Lesser known but highly talented deal makers make the same point. Tom Green is a remarkable negotiator who has worked in both the private and public sectors. Tom was a key figure in the sale of a storied baseball franchise and helped restructure a failing health maintenance organization (HMO) that many thought was headed for bankruptcy. Tom also served on the public interest team that resolved massive litigation against the tobacco industry. Unuil that time, Big Tobacco had never lost a case of paid a dime to settle health claims out of court. When Mississippi, Massachusetts, and a few other states filed suit to recover Medicaid costs for smoking-related illnesses, their effort seemed quixotic. Yet one by one, Green and his colleagues enlisted forty other states to join the effort. That momentum brought the tobacco companies to the bargaining table. In 1998 the industry bowed to more stringent regulation and agreed co pay $350 billion in damages. I wrote a case study about this meganegotiation for my MBA course. Tom visited the class the first time taught it and listened as students analyzed the deft coalition building and old-fashioned horse trading that led to the unexpected outcome. Near the end of the discussion, I asked Tom for his own conclusions. After complimenting students on their observations, he added something that surprised them. The secret of his success, he said, has been “making chaos my friend in negotiation.” ‘When Tom speaks about embracing chaos, he’s not talking merely about cases involving scores of parties, thorny issues, and messy politics. Rather, he knows that all negotiations, large and small, are chaotic, since they take place in fluid and often unpredictable environments, But that’s not to say that negotiation israndom, The process is propelled by how the parties interact. Understanding how seemingly small moves or gestures can change the course of negotiation can mean the difference between agreement and deadlock. Saying that negotiators like Tom are agile improvisers doesn’t mean that they make everything up as they go along. Far from it. They'te well prepared, but they don’t hobble themselves with rigid plans. They understand that effective negotiation demands rapid cycles of learning, adapting, and influencing. Each of those italicized words is critical. Learning, adapting, and influencing take place in most negotiations, of course, but all too often only by happenstance. Instead, I'm talking about deliberate learning, It entails updating your expectations on three levels: (1) the scope of the issues under discussion, (2) the best means for resolving them, and (3) the nature of your relationship with counterparts. “Another way of saying it,” Ambassador Brahimi asserts, “is keep an open mind and be ready to change and adapt to the situation. Don’t ask reality to conform to your blueprint, but transform your blueprint to adapt to reality.” (~~) APAPT = INFLUENCE KK ‘The learning can’t be passive. It's not like browsing in a store, checking stock prices, or reading a text. Latent information in those contexts is unchanging. A book has the same number of pages whether you skim it or read it word for word. But the fact is that much of what you must learn in negotiation can only come by interacting with the other party. Let's say that you reveal your priorities to your counterparts, hoping to foster a cooperative exchange. If you're right, you may proceed down a collaborative path. But if, instead, they interpret your disclosure as a sign of weakness, the negotiation could take a turn you wouldn't have chosen. Or you make a proposal, It doesn’t work for them. They counter with something that’s not so hot from your point of view. But the two ideas together prompt both of you to come up with a third option that neither party would have conjured on its own. When the issue under discussion changes, you must adapt accordingly. It may be a slight adjustment, of, as it was with Jay Sheldon, it may be a major shift Likewise, you seek to influence those on the other side, to convince them of the value of what you're offering. What they say in response—and how they say it—speaks to that particular point, but it is also feedback on how effectively you're engaging your counterpart. Maybe your style suits them. If not, you'll need to change your approach. Beyond the dollars and cents of a potential deal, you are negotiating how to negotiate. SUCCESS AND FAILURE Decades ago, in a low-tise section of Manhattan, the governing board of a church on a corner lot asked the Julien Studley real estate firm to conduct an appraisal. Board members hoped that they could fetch a price that would allow them to build elsewhere and have enough money left over to fund their social programs. The firm’s figure was far less than they needed, however, so the church paid the appraisal fee and abandoned its plan. ‘The young broker handling the matter had another idea, though. What if he could somehow acquire all the parcels on the block? The whole assembly would be worth far more than its component parts. But there were lots of challenges. For starters, his firm didn’t have the resources to buy all the properties, nor did it have a deep-pocketed buyer lined up. And there was the risk that its acquisitions would invite competitors and potential holdouts. Ic took time, but the broker and his firm pulled it off. Parcel by parcel, they met the different needs of various owners. They paid the moving expenses of some elderly tenants in one case. In another, they kept a