Internal circumstances on the other side might cause your counterparts to feel that it is in their best interest to take a chance on a highly unlikely but dramatic win. If their back tables knew what their negotiators had in mind, they might prefer that they take your offer. So you need to determine when your negotiating counterpart or a blocking coalition is operating on their own, without the full knowledge and support of their back tables, and how you might get a message to their back tables and build a winning coalition with them. Sometimes this can be done by offering your negotiating counterparts two starkly different packages, both acceptable to you, with the requirement that they check with their back tables. You could say that you want to know which of your two proposals should be the basis for ongoing negotiations. Indicate that you will check with your back table, and you want them to do the same.
For example, consider a merger being negotiated by the CEOs of two airlines, “FlyAway” and “Destinations.” Neither CEO is dissatisfied with the status quo, but their boards of directors have been pushing them to “do something to reduce the challenges posed by the competition.” If FlyAway and Destinations decide to merge, one CEO might lose his job, and more than one segment of one or both companies might be eliminated. As a result, each CEO has to compare the status quo (which is increasingly less profitable) with a variety of two-way mergers—some of which will create strong push-back internally and might involve one of them losing his job. The board of directors of both FlyAway and Destinations might be happy with a possible merger, but one of the two CEOs might not be. The CEO who manages to build a coalition with the other side’s back table is most likely to win this negotiation. A smart negotiator in this situation needs to be very sure where he stands with his own back table. Then, he needs to put forward multiple deals that the CEO on the other side will have no choice but to show to his or her back table. Your goal as the CEO negotiator in this situation is first to build a coalition with your own back table and then to build a winning coalition with your counterpart’s back table by offering a deal that is good for them and great for you.
Anticipating Coalitional Behavior
A SECOND EXAMPLE of what it takes to build a winning coalition involves “Community Arts, Inc.,” a regional arts council. Museums, after-school groups, community colleges, and others in more than thirty communities banded together in an effort to expand philanthropic and corporate support for the arts. The council has a new chairperson, and more than half the members of the council have become united in opposition to the branding and fundraising strategy she recently announced. On the advice of a private strategic planning company, she proposed a series of high-profit but expensive events built around local celebrities. Her opponents not only felt that a small number of high-cost events was too risky, but also objected to a celebrity-driven strategy. They knew their clout would be enhanced if they could speak with one voice. In the early days of her tenure, the chair spent most of her time with staff developing her fundraising ideas and not enough time sounding out council members and winning their support for the reforms she had in mind.
The chair’s misstep highlights the first rule of coalition building: think carefully about how to invest your time identifying and winning over possible coalition partners. As you talk with each potential coalition member, you may be asked to make tentative commitments before you know all the possible partners and what they might want. Before making commitments, ask yourself two key questions: (1) How will we divide up whatever value we are able to create? (In this case, if her fundraising strategy is successful, how will money be allocated among the competing priorities of the council members?) (2) Should I commit to a pretty good split with an initial set of coalition partners before hearing what others have to offer? I’m afraid the chair was not thinking at all about two important issues: what it would take to build a winning coalition, and, if her strategy were successful, what she would promise to potential coalition partners.
At the early stages of coalition building, your goal should be to collect relatively firm commitments from potential coalition partners while retaining sufficient flexibility to switch allegiances if necessary. This can be delicate, but the results are well worth the effort.
The perils of failing to build coalitions played out on a global scale more than a decade ago. Facing an important round of World Trade Organization negotiations in Cancún, Mexico, the U.S. government approached the European Union and a handful of its other usual partners from the developed world. Together, this informal coalition hammered out a preliminary agreement among themselves focused on how agricultural subsidies should be handled by wealthy nations. Usually, the WTO is against any system of subsidies that impedes free trade. Noticeably absent from these preconference talks were members of the G22, the coalition of rapidly growing developing nations like India, Brazil, and China.
Once the WTO talks were officially under way, it quickly became apparent that the developed nations had made a crucial miscalculation by leaving the developing world out of their preconference coalition. The G22 wanted a commitment from the developed nations that they would reduce the subsidies they provide to their own farmers. (These subsidies make it harder for developing countries that want to export their agricultural products to the United States and Europe.) The wealthy nations were not prepared to make a deal, and the developing world was insulted by the developed world’s failure to take its concerns seriously. Talks broke down, and all sides walked away empty-handed. The lesson for all multiparty negotiators: choose your coalition partners wisely!
Face-to-face conversation among potential allies, or coalition building, requires close attention to the dynamics of group interaction.
Managing Group Interactions
WHEN MULTIPLE PARTIES GATHER to discuss a packed agenda, the process can descend into chaos or stalemate, making it difficult to find the trading zone or build a winning coalition. It’s usually too much to expect that one of the parties will be able to manage the conversation in an even-handed way. If one party, however well intentioned, tries to assume the role of chair, others may view that as a power grab. And in multiparty negotiation, process opportunism—the possibility that a manager or faction will wrest control of the agenda—is a constant worry.
Right from the start of multiparty talks, the parties may want to enlist a trained neutral—a professional facilitator or mediator. Some people think you bring in a mediator only after a dispute has erupted. But the fact is, a neutral party can guide participants into the trading zone much more effectively than they can find it on their own. (More on this in chapter 5.) Neutrals can be particularly helpful in the information-gathering stage. Through a process of joint fact-finding (as discussed in chapter 1), a mediator can help parties generate data and forecasts that everyone can use to build proposals or packages.
As the number of parties in a negotiation increases, group management becomes a bigger challenge. One factor is the phenomenon known as “groupthink,” a term coined by psychologist Irving Janis. When people work together, sometimes their wish for unanimity overrides their commitment to weighing alternatives carefully. In their desire to please the group, participants are sometimes persuaded to accept solutions that are not in their own best interest. For this reason, negotiators in multiparty situations need to remain in close contact with their back tables. Otherwise, the pressure at the table to reach agreement may cause them to lose touch with the interests they are supposed to be representing.
When multiple parties are considering numerous issues at the same time, it often makes sense to break into smaller working groups. For example, when multiple companies or units are considering a possible merger, they might create separate working groups, populated by experts from all sides, to consider a range of technical issues. These subgroups contribute their findings to the larger conversation. That is, they don’t have decision-making responsibility. Also, they must communicate their input in a way that is understandable to others who are not as well versed in
specific technical issues as they are. But the packages that emerge, once the separate pieces have been put together, are more likely to be credible to all sides if they are prepared through appropriately structured working groups.
IN MULTIPARTY NEGOTIATIONS:
•Prepare
•Anticipate coalitional behavior
•Manage group interactions
Prospering in a Multiparty Trading Zone
WITH THOROUGH PREPARATION, the help of a trained mediator, and useful reports from subgroups, participants in a multiparty negotiation should be able to find their way to the trading zone. Once they have arrived, the next step, of course, is to work together to ensure that everyone’s interests are met, even as each side tries to win.
To prosper in a multiparty trading zone, you need to pursue a coalitional strategy, building alliances to increase your leverage. It is important to do this in a way that doesn’t undermine relationships with those who may have started out as your antagonists in a blocking coalition, only to emerge as potential members of your winning alliance. When others approach you about joining their coalition, be sure to respond with caution and tact, especially when you are approached by emissaries from the back tables of other negotiators.
When a large group has succeeded in generating possible proposals or package deals, how should they decide which one prevails? Clarify the way the group intends to make a final decision. In a negotiation with many parties (not just two parties and their back tables), a commitment to unanimity as a decision rule is probably a mistake. It certainly invites blackmail by those who care more about a pet issue or a personal advantage than the overall success of the negotiation. Majority voting is also undesirable (as was explained in chapter 2) since a significant number of parties can be boxed out entirely, leading to unstable agreements because disgruntled minorities may look for opportunities to sabotage implementation of whatever agreement emerged. Most of the time, agreement by an overwhelming majority—consensus agreement—is the best decision rule. Under such a rule, parties should strive to seek unanimity but settle for near-unanimous agreement after every effort has been made to meet everyone’s interests. This is how coalitions win in multiparty negotiation.
Finally, keep in mind that the structure of the negotiating forum itself—that is, the ground rules that constrain the way a multiparty negotiation unfolds (even a two-party negotiation with back tables)—will be a constant topic of conversation. Negotiators need to be able to quickly size up and react to possible changes in coalitional dynamics. By paying close attention to the shifting walk-aways of all parties, as new coalitions emerge backing entirely new deals, multiparty negotiators can pursue their interests and win at win-win negotiation. This requires a commitment to building effective coalitions, often with the back tables of negotiating counterparts.
How these ideas play out can be seen in the daunting task of securing licenses and permits through negotiations with regulators. The odds of success are improved if you can force yourself to think the way they do. That is, you need to imagine what the victory speech might be that your counterpart can give to their back table once their negotiation with you is concluded.
NEGOTIATING WITH REGULATORS
WHEN PREPARING TO LAUNCH new products, plans, and innovations, an organization often must apply for licenses, permits, and other types of regulatory approvals from government agencies. Consider a few such instances:
•A pharmaceutical company is seeking a variety of approvals from federal regulators to bring a new drug to market. In its extensive interactions with regulators, the drug company must establish not only the costs and benefits of the new drug but also how such assessments should be made.
•To construct a mixed-use project, a real estate developer must apply for a number of municipal and state permits. In addition to putting forth a proposal that’s consistent with published rules and regulations, the developer must cope with the larger community’s concerns about congestion and pollution.
•A telecommunications company is about to negotiate with federal regulators over changes in the annual rates it will charge its customers. Given mounting customer dissatisfaction over service quality, even the company’s most compelling economic analysis may not be sufficient to win regulatory approval.
Thankfully, even the most elaborate application processes allow individual regulators a measure of discretion, a fact that gives you multiple opportunities to negotiate with them—and, indeed, even requires that you do so. The four rules that follow will help you navigate a wide range of governmental settings, both in the United States and in other countries, and improve your odds of gaining approval. Indeed, the negotiation strategy that works with regulators—especially forcing yourself to think the way they do—can be helpful in many other contexts as well.
Think Like the People You Want to Influence
AS IN ANY NEGOTIATION CONTEXT, it helps to put yourself in the other side’s shoes. When negotiating with a regulator, think like one. This will help you build a coalition with their back table. (Yes, even regulators have back tables!) Like any professional group, regulators have a mindset or beliefs that govern how they think about their work. Dealing with regulators—or any group for that matter—requires that you understand what’s in their head. Here are four beliefs that most regulators share.
First, regulators assume they can do a good job only if they follow the letter of the law and treat everyone who has a similar request in exactly the same manner. If you are seeking state approval for a new building technology that has already been turned down (when a competitor sought approval), don’t expect the agency to accept your application. You’ll need to propose something sufficiently different so that the previous decision doesn’t apply.
Second, regulators assume that they will have to account for the decisions they make, as well as for the reasons they made them. As a result, they are likely to treat every decision as if it sets a precedent. They will also be sure to create a paper trail that can be used to justify their actions.
Third, regulators assume that most applicants will try to cut corners to save time and money. This forces them to be on the lookout for applicants who skimp on supporting information or who fail to adequately answer required questions. It would be a mistake to try to minimize the burden on regulators by limiting the information you submit.
Fourth, regulators tend to be much less concerned about the net benefits associated with a specific proposal or project than with the extent to which you’re following rules, procedures, and standards. From a regulator’s standpoint, even small risks to the public loom larger than potential gains for proponents or the broader community.
To illustrate these beliefs, suppose that “GreenTech Chemical Company” asks state environmental regulators for permission to install a cleaner, “greener” waste treatment technology. GreenTech argues that if all goes well, the new equipment will substantially exceed the minimum environmental standards required by law and at lower costs than prevailing technologies. Regulators are likely to balk at this proposal, noting that the new technologies are not fully covered by published standards. If the technologies fail to perform, the regulators will be singled out for blame.
In response, GreenTech might request contingent approval for a trial run of the new technology, with environmental organizations helping to evaluate the test results. Benchmarks would be set to assess whether results exceed current regulations and meet minimum safety requirements. When regulators learn that activist groups are involved in the proposal and that the trial run will not set a precedent, they may be willing to go along with the plan.
Assume That Regulators Have More Discretion Than They Admit
MOST REGULATORS WILL INSIST they have no freedom to interpret prevailing guidelines. Even if they could use their discretion to solve a problem in a novel way, they’re unlikely to do so for fear of being viewed as making subjective or personal judgments. This is problematic because their professional identities hinge
on the presumption of objectivity. Never act as if a regulator has the option of deciding which provisions to enforce and which to ignore.
Yet regulators actually do have a certain amount of discretion when it comes to interpreting guidelines, and they know that this discretion constitutes a source of power. Here are just a few of the types of judgment calls that regulators can make when processing your application:
•They can move quickly on an application or let it sit at the bottom of the stack.
•They can have a very experienced staff member handle your application or have a newcomer take care of it.
•They can make themselves available to you early in the process and alert you to mistakes, or they can meet only after you’ve submitted the application and reject it for containing incomplete data.
•They can share “model” applications that have won approval in the past or refrain from sharing such information.
•They can consider new independent scientific or technical studies on their merits or reject data from such studies on the grounds that their agency has not yet reviewed them.
Base Your Request on Past Approvals and Experiences
WHEN PROPOSING A NOVEL PRODUCT, service, or pricing strategy, look for elements of your proposal that have been approved in the past. Some aspects of what you’re proposing may have already passed through the regulatory gauntlet in another context. Consultants with national or international experience may be able to provide this information. Regulators will take note if some other agency (perhaps in another country) has already approved what you’re proposing.
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